NEOLIBERAL PENSION REFORM AS A CLASS PROJECT: THE CASES OF CHILE AND TURKEY

A THESIS SUBMITTED TO THE GRADUATE SCHOOL OF SOCIAL SCIENCES

OF MIDDLE EAST TECHNICAL UNIVERSITY

BY

BURCU GÖKÇE YILMAZ AKIN

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR

THE DEGREE OF DOCTOR OF PHILOSOPHY IN

THE DEPARTMENT OF INTERNATIONAL RELATIONS

SEPTEMBER 2014

Approval of the Graduate School of Social Sciences

Prof. Dr. Meliha Altunışık

Director

I certify that this thesis satisfies all the requirements as a thesis for the degree of Doctor of Philosophy. Prof. Dr. Hüseyin Bağcı

Head of Department This is to certify that we have read this thesis and that in our opinion it is fully adequate, in scope and quality, as a thesis for the degree of Doctor of Philosophy.

Assoc. Prof. Dr. Pınar Bedirhanoğlu Supervisor Examining Committee Members Assoc. Prof. Dr. Galip Yalman (METU, ADM)

Assoc. Prof. Dr. Pınar Bedirhanoğlu (METU, IR)

Assoc. Prof. Dr. Sevilay Kahraman (METU, IR)

Assoc. Prof. Dr. Özgehan Şenyuva (METU, IR)

Assoc. Prof. Dr. Gülbiye Y. Yaşar (AU, HM)

iii

I hereby declare that all information in this document has been obtained and presented in accordance with academic rules and ethical conduct. I also declare that, as required by these rules and conduct, I have fully cited and referenced all material and results that are not original to this work.

Name, Last name : Yılmaz Akın, Burcu Gökçe

Signature :

iv

ABSTRACT

NEOLIBERAL PENSION REFORM AS A CLASS PROJECT:

THE CASES OF CHILE AND TURKEY

Yılmaz Akın, Burcu Gökçe

Ph.D., Department of International Relations

Supervisor: Assoc. Prof. Dr. Pınar Bedirhanoğlu Toker

September 2014, 211 pages

The purpose of the thesis is to demonstrate the validity of David Harvey’s

argument that neoliberalism is a class project in relation to the transformation of

pension systems in the countries of the South that have been forced by the

International Financial Institutions since the 1980s. The proposed reform has tried to

be justified by a discourse that has emphasized the need for sustainable pension

systems in the face of population ageing while population ageing has indeed been

one of the most important demographic problems of primarily the countries of the

North. Even though the neoliberal pension reform has aimed to reduce the role of the

state, the practice has affirmed Andrew Gamble’s argument that a strong state is

needed to sustain the free market economy in pensions which is capable of making

necessary pro-capital redistributions as also Harvey underlines and managing the

social and political implications of the relevant transformations. Two important

achievements of the neoliberal pension reforms from the perspective of capital have

been the redefinition of the pension issue from an important political question to an

age-based technical on the one hand, and the opening up of the pension “sector” to

capital accumulation through its commodification. The thesis will focus on the

pension transformation in Chile and Turkey in order to understand the political and

economic context and contradictions of the process in line with the main arguments

of the thesis.

v

Keywords: Neoliberalism, pension reform, International Financial

Institutions, countries of the South, Chile, Turkey.

vi

ÖZ

BİR SINIF PROJESİ OLARAK NEOLİBERAL

EMEKLİLİK REFORMU: ŞİLİ VE TÜRKİYE ÖRNEKLERİ

Yılmaz Akın, Burcu Gökçe

Doktora, Uluslararası İlişkiler Bölümü

Tez Danışmanı: Doç. Dr. Pınar Bedirhanoğlu Toker

Eylül 2014, 211 sayfa

Bu tez çalışmasının amacı David Harvey’in “neoliberalizm bir sınıf

projesidir” savını 1980’den bu yana Uluslararası Finans Kuruluşları tarafından

Güney ülkelerine uygulatılan emeklilik sistemi reformları bağlamında açıklamaktır.

Söz konusu reform süreçleri yaşlanma sorunu çerçevesinde emeklilik sistemlerinin

sürdürülebilirliği üzerinden meşrulaştırılmaya çalışılmaktadır. Hâlbuki yaşlanma

sorunu Güney ülkelerinden çok Kuzey ülkelerinin önemli bir demografik sorunudur.

Her ne kadar reform süreci devletin rolünü küçültmeyi amaçlasa da pratikte Andrew

Gamble’in “güçlü devlet” savını doğrulamaktadır. Diğer bir ifadeyle, emeklilik

alanının serbest piyasa koşullarında düzenlenmesinde sermaye yanlısı dağıtım

politikalarını ancak güçlü bir devlet sürdürebilir ve emeklilik reformunun sosyal ve

politik sonuçlarını yine ancak güçlü bir devlet yönetebilir. Neoliberal emeklilik

reformu sermaye açısından iki önemli başarıya imza atmıştır: Emeklilik meselesi

yeniden tanımlanmış, önemli bir politik konu olmaktan çıkmış ve teknik bir konuya

indirgenmiştir. Buna ek olarak, emeklilik alanı sermaye birikimine açılmıştır. Bu tez

çalışması siyasi ve ekonomik süreçler bağlamında Şili ve Türkiye’de emeklilik

reformuna odaklanmakta ve sürecin çelişkilerini tezin temel savları çerçevesinde

anlamaya çalışmaktadır.

Anahtar Kelimeler: Neoliberalizm, emeklilik reformu, Uluslararası Finans

Kuruluşları, Güney ülkeleri, Şili, Türkiye

vii

To the Memory of My Mother

viii

ACKNOWLEDGEMENTS

First and foremost, I would like to express the deepest appreciation to my

supervisor Assoc. Prof. Dr. Pınar Bedirhanoğlu Toker for encouragement, insight,

criticism and advice she has provided throughout my time as her student.

I would like to thank my committee members, Assoc. Prof. Dr. Galip

Yalman, Assoc. Prof. Dr. Sevilay Kahraman, Assoc. Prof. Dr. Özgehan Şenyuva and

Assoc. Prof. Dr. Gülbiye Yenimahalleli Yaşar, for their valuable comments,

suggestions and remarks on the thesis. I am also indebted to Yıldırım Koç who

provided me with primary sources and insight.

My family deserves special thanks for their faith in me during the years of my

study. In particular, I am indebted to my spouse İlker and my elder sister Özlem for

providing me with endless support.

ix

TABLE OF CONTENTS

PLAGIARISM PAGE ................................................................................................. iii

ABSTRACT ................................................................................................................ iv

ÖZ ............................................................................................................................... vi

DEDICATION ........................................................................................................... vii

ACKNOWLEDGEMENTS ...................................................................................... viii

TABLE OF CONTENTS ............................................................................................ ix

LIST OF TABLES ..................................................................................................... xii

LIST OF ABBREVIATIONS ................................................................................... xiii

CHAPTER

1.INTRODUCTION..................................................................................................... 1

1.1. Basic Definitions ............................................................................................... 2

1.2 Conceptual Framework ...................................................................................... 3

1.3. Historical Framework ........................................................................................ 9

1.4 Outline of the Thesis ........................................................................................ 15

2. NEOLIBERALISM, THE PENSION REFORM

AND THE PRIVATE PENSION ACCOUNTS ........................................................ 18

2.1 Introduction ...................................................................................................... 18

2.2 The Historical Evolution of Social Security and Pension Systems .................. 19

2.2.1 Pre-World War I ........................................................................................ 20

2.2.2 The Interwar Period ................................................................................... 22

2.2.3 Post-World War II ..................................................................................... 27

2.3 The Neoliberal Transformation of Pension Systems ........................................ 31

2.3.1 The International Coalition ........................................................................ 34

2.3.1.1 World Bank ......................................................................................... 36

2.3.1.2 Criticisms Towards the World Bank Report ....................................... 41

2.3.1.3 World Bank’s New Perspective .......................................................... 50

2.3.2 2008 Global Financial Crisis and Private Pension Accounts .................... 56

2.3.2.1 The Responses of the Reforming Countries........................................ 57

x

2.3.2.2 The ILO’s New Initiative: Social Protection Floor ............................. 60

2.4 Conclusion ........................................................................................................ 62

3. PENSION PRIVATIZATION IN CHILE:

How and Why It Became a Model? ........................................................................... 64

3.1 Introduction ...................................................................................................... 64

3.2 Pension Privatization in Chile .......................................................................... 66

3.2.1 The Pension System Before 1973 .............................................................. 66

3.2.2 The Privatization of the Pension System (1981)/Pinochet’s Authoritarian Era ....................................................................................................................... 69

3.2.2.1 New Private Pension System ............................................................... 73

3.2.2.2 Expected Results? Real Outcomes ...................................................... 76

3.3. Reform of Pension Reform during Centre-Left Coalition Era ........................ 82

3.3.1 Alywin/Frei/Lagos Governments ............................................................... 83

3.3.2 Bachelet Government ................................................................................. 88

3.3.3 An Assessment of Centre-Left Coalition Era ............................................ 91

3.4 Conclusion ........................................................................................................ 93

4. TURKISH PENSION TRANSFORMATION AND

THE EVOLUTION OF THE INDIVIDUAL PENSION SYSTEM .......................... 95

4.1 Introduction ...................................................................................................... 95

4.2 Pension Transformation in Turkey ................................................................... 98

4.2.1 The Pension System before 1980 ............................................................... 98

4.2.2 Pension Transformation, International and National Actors ................... 101

4.2.2.1 The Role of International Actors ....................................................... 109

4.2.2.1.1 World Bank ................................................................................. 110

4.2.2.1.2 International Labour Organization ............................................. 112

4.2.2.1.3 International Monetary Fund ...................................................... 115

4.2.2.1.4 European Union .......................................................................... 118

4.2.2.2 The Role of Turkish Capital .............................................................. 122

4.2.2.3 The Reform Process .......................................................................... 126

4.2.2.3.1 1999 Reform ............................................................................... 127

4.2.2.3.2 2006-2008 Reforms .................................................................... 131

4.2.2.3.3 The Assessment of 1999 and 2006-2008 Arrangements ............ 133

xi

4.2.3. The Islamic Management of the Losers of Neoliberal Pension Policies 139

4.3 Individual Pension System ............................................................................. 143

4.3.1 Historical Background ............................................................................. 144

4.3.2 How the IPS Works? ............................................................................... 147

4.3.2.1 Fees and Charges .............................................................................. 148

4.3.2.2 Tax Incentive (valid until 2013) ........................................................ 149

4.3.2.3 2008 Global Financial Crisis and Changes in the IPS ...................... 150

4.3.2.4 Change in Tax Incentive ................................................................... 151

4.3.3 Ten Years Experience .............................................................................. 154

4.3.3.1 The IPS by Numbers ......................................................................... 156

4.3.3.2 The Role of the IPS in Turkish Financial Sector .............................. 159

4.4 Conclusion ...................................................................................................... 161

5. CONCLUSION .................................................................................................... 163

REFERENCES ......................................................................................................... 171

APPENDICES

A. TURKISH SUMMARY ...................................................................................... 200

B. CURRICULUM VITAE ..................................................................................... 210

C. TEZ FOTOKOPİSİ İZİN FORMU ..................................................................... 211

xii

LIST OF TABLES

TABLES

TABLE 1 LABOUR FORCE STATUS……………………………………...137

TABLE 2 EMPLOYMENT BY STATUS…………………………………...138

TABLE 3 SOCIAL SECURITY COVERAGE…..…………………………..139

TABLE 4 INDIVIDUAL PENSION COMPANIES………………………....155

TABLE 5 INDIVIDUAL PENSION SYSTEM (2003-2013)………….….…157

TABLE 6 TOTAL AVERAGE RETURNS OF INDIVIDUAL PENSION

FUNDS…………………………………………………………………………….159

TABLE 7 TOTAL ASSET SIZE OF TURKISH FINANCIAL SECTOR…...160

xiii

LIST OF ABBREVIATIONS

ADB Asian Development Bank

AFP Administradoras de Fondos de Pensiones

APS Pension Solidarity Complement

BAĞ-KUR Social Security Organization of Craftsmen, Tradesmen and

Other Self- Employed

BRSA Banking Regulation and Supervisory Agency

BSP Basic Solidarity Pension

CBRT Central Bank of the Republic of Turkey

CISS Inter-American Conference on Social Security

CMB Capital Markets Board of Turkey

ECLAC Economic Commission for Latin America and the Caribbean

EU European Union

FDI Foreign Direct Investment

GDP Gross Domestic Product

GNP Gross National Product

JDP Justice and Development Party

HIC Health Insurance Commission of Australia

IDB Inter-American Development Bank

IFI International Financial Institution

ILO International Labour Organization

IMF International Monetary Fund

IPS Individual Pension System

ISI Import-Substituting Industrialization

ISSA International Social Security Association

OECD Organization for Economic Cooperation and Development

MLSS Ministry of Labour and Social Security

MÜSİAD Association of Independent Industrialist and Businessmen

MPG Minimum Pension Guarantee

NDC Notional Defined Contribution

xiv

NGO Non-Governmental Agency

NSP New Solidarity Pillar

OYAK Armed Forces Pension Fund

PASIS Means-Tested Assistance Pension

PEPF Public Employees Pension Fund

PAYGO Pay-As-You-Go

PMC Pension Monitoring Centre

PPDPL Programmatic Public Sector Development Policy Loan

PWC Post-Washington Consensus

SAFP Superintendency of AFPs

SIB State Investment Bank

SII Social Insurance Institution

SPO State Planning Organization

SSI Social Security Institution

TİSK Turkish Confederation of Employer Associations

TOBB The Union of Chambers and Commodity Exchanges of Turkey

TURKSTAT Turkish Statistical Institute

TÜSİAD Turkish Industry and Business Association

USAID United States Agency for International Development

WC Washington Consensus

WTO World Trade Organization

1

CHAPTER 1

INTRODUCTION

In the last thirty years, the welfare state has been shrinking in the world and

private pension accounts have flourished especially in the countries of the South

within the framework of a global campaign on pension reform that underlines the

need to abandon state-funded pension systems. This thesis will problematize the

simultaneous introduction of private pension accounts in the South as one of the most

important examples of the implementation of neoliberal economic and social policies

in the world.

Concerning the pension systems, the abandonment of full-employment

policies and the enforcement of flexible labour market policies with the neoliberal

transformation in the world created a crisis environment for traditional pension

systems. Then, the International Financial Institutions (IFIs), national and

international neoliberal actors started to promote pension reform to face with this

crisis. The problem of population ageing and the sustainability of pension systems

have become the basic arguments of neoliberals to force pension reform in the world.

The reform package envisaged a reduced role of the state by downsizing the public

pension pillar and an increased role to financial markets by introducing private

pension accounts.

Even though the conventional literature defines the forced change in pension

systems as reform, it is better named as a transformation or restructuring since

“reform” has a positive appeal as improvement. As it will be elaborated in the

following chapters, the neoliberal transformation of pension systems and the

implementation of private pension accounts have not served to the benefit of

labourers. Moreover, the 2008 global financial crisis has proved the fragility of

private pension accounts as the latter have incurred substantial losses. The forced

pension transformation in the world has indeed constituted one of the best examples

of David Harvey’s argument that neoliberalism is a class project.

2

1.1. Basic Definitions

Public and private pension systems differ in terms of three basic

characteristics that can be identified as the finance model, pension plan, and benefit

structure. In economic terms, public pension systems require full employment

policies since they are financed by pay-as-you-go (PAYGO) method which means

that the pension benefit of the current retirees is paid out of taxes that are paid by

current labourers. In other words, the revenues and the expenses of the system are

realized at the same time. In this context, the system is very sensitive to the premium

collection and the efficient use of accumulated funds. The public pension system is

mandatory for all employees. As the system is based on intergenerational solidarity,

there is redistribution from younger to older and from high-paid to the less-paid.

In the public pension systems, the retirees are paid through defined-benefit

schemes1. That is to say, a guaranteed benefit is calculated according to a prescribed

formula. Public pension systems have flat-rate benefit structures. Therefore, the

amount of pension is determined by the length of membership in the scheme. The

total earning throughout the working life and the contributed amount are ignored

during the calculation of the pension payment.

The private pension systems operate on a funded basis instead of PAYGO.

Since the accumulated pension funds are invested in financial instruments, they are

exposed to volatility in the financial markets.

The private pension systems can be mandatory or voluntary for members.

Many countries in the South were forced to make pension reform in the 1990s

following the Chilean case in which a full privatization of the public pension system

was realized. Today, most of the reforming countries however have multipillar

pension systems that generally involve mandatory private pension pillar in addition

to the public pension pillar. The Turkish individual pension system is based on

voluntary membership though. Put it differently, Turkish pension system still has a

strong public component.

1 World Bank, Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth (New York:

Oxford University Press, 1994), p. xxi.

3

In the private pension systems, the amount of contribution is predetermined

and the pension benefit is calculated by a formula that involves both the contribution

level and the investment return. Thus, in defined-contribution schemes2 the pension

benefits are calculated according to earnings-related benefit structures which mean

that the pension payment is granted as a function of earnings gained during the active

working career by the beneficiary. Therefore, the earnings-related system provides

advantage to upper-income classes.

Apart from the pension payments, all social security systems, publicly or

privately organized, provide means-tested benefits3 to people who demonstrate that

their income falls below a certain level.

Some countries like Sweden have found a middle way regarding the pension

reform. Their pension systems rely on Notional Defined Contribution (NDC)

schemes. Individual pension accounts, namely notional accounts, are established and

indexed to the rate of growth of the GDP or of wages rather than market rate of

interest. Defined-contribution amounts are accumulated throughout the working life.

This system keeps public administration of the notional accounts and is unfunded in

nature.

1.2 Conceptual Framework

This thesis aims to demonstrate the validity of David Harvey’s and Andrew

Gamble’s arguments on neoliberalism by problematizing them in relation to the

transformation of pension systems in the countries of the South in general and in

Chile and Turkey in particular. Since neoliberal policies have been institutionalized

through the so-called Washington and the post-Washington Consensus, the thesis

will also identify the changing forms of interventions within neoliberalism.

Harvey explores how neoliberalism has become a hegemonic process in the

world since the 1980s in his book named A Brief History of Neoliberalism. He

2World Bank, 1994, p. xxi.

3 World Bank, 1994, p. xxii.

4

summarizes neoliberalism by using the study of Dumenil and Levy4, as a project to

achieve the restoration of class power.5 The main arguments Harvey develops to

criticize neoliberalism are as follows: It has produced a series of financial crises in

the countries of the South; it has not generated new wealth but redistributed wealth

from the poor to the rich; it has paved the way for the commodification of commons;

and contrary to the neoliberal motto for a limited state, it has required enhanced state

intervention to redistribute wealth in favour of capital. Harvey designates raising

neo-conservatism, which has an authoritarian character, as a new stage of

neoliberalism in order to cope with the failures of the latter and finds its implications

in the United States and in several Asian countries quite threatening.6

Contrary to Harvey’s emphasis on the rise of authoritarianism, the idea of

individual freedom and freedom of choice constitutes the basis of neoliberal ideas,

which advocate a limited state to arguably liberalize all aspects of life and to create

more democratic societies. This neoliberal argument is based on the assumption that

a real democracy can only be a market democracy in which the social welfare

requirements of the people can be sustainably ensured by the enhancement of market

freedoms, which would in turn bring in enhanced productivity and growth. In this

context, Keynesian policies such as full employment and the state intervention

should also be abandoned; trade unions as one of the main threats to market

fundamentalism should be weakened, welfare state provisions should be dismantled,

and the state control over public enterprises should be alleviated by privatization.7 In

short, market freedoms should be ensured by the elimination of all sorts of

collectivist social and economic policies, which according to the neoliberals are

nothing but products of populist government policies implemented to win the support

4 Gérard Dumenil and Dominique Levy, “Neo-Liberal Dynamics: A New Phase”, in Kees van der Pijl,

Libby Assassi and Duncan Wigan (eds.), Global Regulation: Managing Crises after the Imperial Turn (New York: Palgrave Macmillan, 2004). 5 David Harvey, A Brief History of Neoliberalism (New York: Oxford University Press, 2005), p. 16.

6 George Ritzer, “Book Review” (A Brief History of Neoliberalism, by D. Harvey), American Journal of

Sociology (Vol. 113, Issue. 1, July 2007), pp. 287-288. 7 Andrew Gamble, “The Free Economy and the Strong State: The Rise of the Social Market Economy”,

in Ralph Miliband and John Saville (eds.), The Socialist Register (Vol. 16, 1979), p. 14.

5

of electorates favouring parties that would deliver social welfare provisions.8 This

argumentation has inevitably forced the neoliberals to face a “democracy versus

freedom” dilemma in which they have practically favoured the latter with significant

authoritarian implications as also Harvey has underlined.

The question of how neoliberalism has been legitimized through the

construction of consent is also answered in Harvey’s work. The selected examples

demonstrate that the popular consent has been provided by the state’s authoritarian

force and the International Monetary Fund (IMF) operations in the periphery. In the

centre, neoliberal policies have enclosed the middle classes with private property

individualism and entrepreneurial opportunities. On the other side, changes in

industrial relations with new employment models have reduced the power of

potential resistance.9 Moreover, the concentration of power in the media sector has

created an effective way to make the propaganda of neoliberalism to persuade people

that they would be all better off under the neoliberal regime.10

To be more precise,

the ruling classes have transformed their interests into an illusory general interest.11

Having emphasized the continuing character of primitive accumulation,

which was developed by Marx12

, Harvey has developed the concept of accumulation

by dispossession. Hence for Harvey, the former is not simply a precapitalist

phenomenon.13

The primitive accumulation of Marx fundamentally problematizes

the enclosing of commons such as appropriation of land, water and mines,

commodification of labour power, conversion of some property rights into exclusive

private property rights and monetization of exchange and taxation.14

Building on the

8 Andrew Gamble, “Neo-Liberalism”, Capital & Class (Vol. 25, No. 75, 2001), p. 132.

9 Harvey, 2005, pp. 40, 61.

10

Harvey, 2005, p. 38. 11

Harvey, Spaces of Capital: Towards A Critical Geography (New York: Routledge, 2001), p. 271. 12

Karl Marx, Capital: A Critique of Political Economy (USA: Charles H. Kerr & Company, 1906), pp.

784-787. 13

Nancy Hartsock, “Globalization and Primitive Accumulation: The Contributions of David Harvey’s Dialectical Marxism”, in Noel Castree and Derek Gregory (eds.), David Harvey: A Critical Reader (Malden, MA: Blackwell, 2006), p. 177. 14

David Harvey, The New Imperialism (New York: Oxford University Press, 2003), p. 145.

6

concept of “primitive accumulation” that emphasizes proletarianization,

commodification, predation, fraud and violence in the process of dispossession and

private property formation, Harvey proposed the concept of “accumulation by

dispossession” to explain the features of contemporary capitalism.15

For him, these

are: stock promotions and ponzi schemes, structured asset destruction through

inflation and asset-stripping through mergers and acquisitions, high levels of national

debt, corporate fraud, speculative raiding by hedge funds, the dispossession of assets

by credit and stock manipulations and the raiding of pension funds by stock and

corporate collapses.16

Besides this, both Harvey and Gamble put a specific emphasis on the role of

the state in the implementation of neoliberal policies. For Gamble, who puts the

notion of strong state at the centre of his analysis of neoliberalism, the state should

be strong enough to break the resistance of any group against neoliberal economic,

political and social arrangements.17

Moreover, he emphasizes the capability of state

in establishing the right kind of institutional setting that would be compatible with

the functioning of the market. This brings him to identify neoliberalism with free

economy and the strong state rather than a weak one.18

According to Gamble, while

Keynesian policies required an active state to regulate the economy close to full

employment and to support social welfare provisions19

, neoliberalism has demanded

a strong state to remove all obstacles to the capital movements, to open all protected

areas to the capital and to settle potential resistance against capital accumulation.

Thus, the rise of conservative statecraft side by side neoliberalism in the 1980s has

15

Harvey, 2003, p. 144; Jim Glassman, “Primitive Accumulation, Accumulation by Dispossession,

Accumulation by ‘Extra Economic’ Means”, Progress in Human Geography (Vol. 30, No. 5, 2006), pp. 611, 618. 16

Harvey, 2003, p. 147.

17

Gamble, 2001, p. 132. 18

Andrew Gamble, “Two Faces of Neo-Liberalism”, in Richard Robison (ed.), The Neo-Liberal Revolution: Forging the Market State (London: Palgrave Macmillan, 2006), p. 22. 19

Gamble, 2006, p. 24.

7

transformed the latter into a hegemonic project that has involved specific ideological,

economic and political strategies.20

For Harvey, the state intervention has also been necessary to resolve conflicts

within the capitalist class since neoliberalism requires the pursuing of self-interests in

a competitive market. Put it differently, the state has been given a vital role in

maintaining collective class interests.21

This emphasis on state in understanding the rise of neoliberalism requires one

to problematize state-capital relations without falling into a reductionist trap. As

Clarke puts it, the state should not be seen as an automatic facilitator of capital’s

functional needs for accumulation.22

He argues that “the state is not simply a tool of

capital; it is an arena of class struggle,”23

so that the relationship between the state

and capital cannot be comprehended as a direct relationship. Rather, it is the rule of

money and the rule of law that ensures the subordination of the state by capital.24

It is

thus the changing forms of class struggle and the changing forms of state that ensure

the contingent rather than pre-determined development of capitalism within which

“the capitalist mode of production can only be grasped as a complex totality.”25

Harvey also provides a spatio-temporal analysis of the spread of

neoliberalism in the world on the basis of the rapid movement of capital and uneven

geographical development between regions that ultimately lead to numerous

financial crises.26

He explains how neoliberalism has capitalized on repetitious crises

of the financialization process and makes sense of the distribution of capital by

20

Ross Coomber, “Book Review” (The Free Economy and the Strong State: The Politics of Thatcherism, by A. Gamble), The Sociological Review (Vol. 37, Issue 3, August 1999), p. 566. 21

Harvey, 2001, p. 275. 22

Simon Clarke, “The Global Accumulation of Capital and the Periodization of the Capitalist State Form”, in Werner Bonefeld, Richard Gunn and Kosmas Psychopedis (eds.), Open Marxism, Vol. 1: Dialectics and History (London: Pluto Press, 1992), pp. 133-134. 23

Simon Clarke, “State, Class Struggle, and the Reproduction of Capital”, in Simon Clarke (ed.), The State Debate (London: Macmillan, 1991), p. 195. 24

Clarke, 1992, pp. 135-136. 25

Clarke, 1992, p. 149. 26

Kim Moody, “Book Review” (A Brief History of Neoliberalism, by D. Harvey), Dialectical Anthropology (Vol. 32, Issue 1-2, June 2008), p. 54.

8

conceptualizing the notion of creative destruction.27

Although neoliberalism has been

proposed as a model for development, it is not very successful in increasing

economic growth and revitalizing capital accumulation. However, it has succeeded in

the redistribution from periphery to the centre and from the poor to the rich. The

biggest achievement of the neoliberalism has been the restoration of the power of the

ruling classes. For instance, neoliberal policies has not only increased the wealth of

ruling classes in advanced capitalist countries but also created a new rich strata in the

periphery such as Russia, China, Mexico, Eastern Europe and the former Soviet

republics.28

Dumenil and Levy define three periods in the history of capitalism in relation

to financialization: the first was the financial hegemony that had ended by the 1930s

economic crisis; the next was the Keynesian compromise that ended by the 1970s

economic crisis; and the last is the neoliberal financial hegemony, which has been

still progressing since the 1980s. The last one has been a counterattack to the

deterioration of the income of the richest strata after World War II owing to the

welfare state compromise.29

As the post-World War II welfare state consensus was

based on a legal comprehensive role for the state and strong trade unions, they have

become the main targets of the neoliberal policies. In other words, the ruling classes

have started to restore their wealth by dominating labour and the periphery.

Following Harvey’s arguments, this thesis will argue that the ultimate

purpose of the neoliberal pension transformation and the introduction of private

pension accounts have been the dispossession of people’s pension rights. Harvey

states that the ultimate point of all policies of possession was the reversion of

common social rights of pension and health, which had been won by hard class

struggles, to the private domain.30

On this basis, this thesis will demonstrate how this

argument has been realized in Chile and Turkey.

27

David Harvey, “Neo-Liberalism as Creative Destruction”, Geografiska Annaler (Vol. 88, Issue 2, 2006), p. 148. 28

Harvey, 2005, p. 17. 29

Dumenil and Levy, 2004, pp. 31-32. 30

Harvey, 2003, p. 148.

9

1.3. Historical Framework

The welfare state was developed after the World War II as an outcome of the

success of labour struggles that had been given against the capital since the 19th

century. Thus, it was not a predetermined notion. Even though the neoliberal turn

broke up the welfare state and placed the understanding of individualized welfare

arrangements to a certain extent, all these processes have also been realized in the

context of class struggles. As these processes have had a contingent character,

current developments in the pension systems would also be shaped by the forms of

class struggle and the attitude of governments.

Neoliberal approach to legitimize pension and social security transformation

is considered to be superficial and reductionist. The sustainability of pension systems

is linked to a very technical issue of population ageing. The public pension systems

are criticized of being inefficient. Moreover, they are seen as an obstacle to the

deepening of financial markets. However, the pension issue is an important social

question. Historically, the capital accumulation and welfare state provisions had gone

hand in hand until the 1970s when the former pressed the boundaries of the latter.

Even before the 1970s economic crisis, famous liberal scholars such as

Friedrich A. Hayek and Milton Friedman had been arguing that traditional pension

systems constituted a threat to individual liberty and therefore the pension systems

should be privately organized.31

The crisis only created suitable conditions for the

implementation of neoliberal policies favouring flexible labour markets and private

pension systems. In this point, the private pension funds had a great importance since

they became the major operators in the financialization of the economic system.32

In

addition, the rapid movement of capital and financialization has been legitimized as

an indispensible consequence of globalization. However, globalization is not a trend

as liberals has argued but a class project to construct a stable hegemonic order.

31

Friedrich A. Hayek, The Constitution of Liberty (Chicago: The University of Chicago Press, 1960);

Milton Friedman, Capitalism and Freedom (Chicago: The University of Chicago Press, 1962). 32

Samir Amin, “The Implosion of Global Capitalism: The Challenge for the Radical Left”, Paper

Presented at the Workshop Trade Unions, Free Trade and the Problem of Transnational Solidarity (UK: Nottingham University, December 2-3, 2011), p. 27.

10

Therefore, it targets state-backed welfare provisions and developmentalism in order

to build market fundamentalism that is governed by monetarist policies. However, it

does not mean the elimination of the state. Instead, the state is forced to restructure

institutionally to facilitate the construction of financial hegemony.33

Since neoliberal

economic policies have based on monetarism and ideal of sound money, the

governments have been required to apply monetarist policies to maintain the

confidence of the international financial markets that facilitate the high levels of

borrowing.34

As mentioned above, the population ageing has been the most used reason to

force pension transformation by the neoliberal international coalition. Interestingly,

this reform agenda has been implemented more firmly to the countries of the South

even though population ageing has been a primary issue for the North. The

Organization for Economic Cooperation and Development (OECD) countries, for

instance, have generally introduced parametric changes in their public pension

systems and created mandatory private pension pillars as secondary. However, the

public pension system was fully privatized in Chile and maintained up to date though

it had a devastating social and economic impact on society. Moreover, many

countries in Latin America, Eastern Europe and the former Soviet space were forced

to change their public pension arrangements.

This outcome fits well to Gamble’s argument that “leading capitalist powers

have always found it easier imposing neoliberal prescriptions on the periphery”.35

On

the contrary, established democratic systems, consensus culture among capital and

labour, and powerful organized groups have made it difficult to force neoliberal

reforms in core developed countries of the North. Conditionalities attached to the

IMF or the World Bank credits have been effective tools to this end in the South

while the opening of their markets for capital accumulation has primarily served to

the interests of the capital groups in core Northern ones. This clarifies the fact that

the pro-reform coalition in favour of neoliberalism has comprised not only of the

33

Philip McMichael, “Globalization: Trend or Project?”, in Ronen Palan (ed.), Global Political Economy, Contemporary Theories (London, New York: Routledge, 2000), p. 113. 34

Gamble, 1979, p. 11. 35

Gamble, 2006, p. 27.

11

IFIs, but also of the United States Agency for International Development (USAID),

the Inter-American Development Bank (IDB), the Asian Development Bank (ADB),

internationally active insurance companies, national liberal think-tanks and private

sector companies.

Ten policy prescriptions for Southern countries which are listed by the

economist John Williamson and labeled as Washington Consensus (WC) reflect the

convergence of three institutions of the IMF, the World Bank and the United States

treasury in the 1980s: fiscal policy discipline, reorientation of public expenditure, tax

reform, interest rates, unified and competitive exchange rates, trade liberalization,

openness to foreign direct investment (FDI), privatization, deregulation, secure

property rights.36

Put it differently, macroeconomic discipline, openness to trade and

FDI, and market competition have been the neoliberal dominant approach to the

economic growth in Southern countries and yielded to the first generation of reforms

in these years. This thesis does not intend to discuss the logic behind all WC

principles but will give some key information in order to understand the

transformation of the pension systems and increased trend on poverty issues.

Hence, as Gore underlines, it has been argued that countries which follow the

WC policies would capture foreign direct investment, access new markets and

available financial flows. They would also get know-how and new technologies. In

sum, these countries would benefit from new external environment of liberal

international economic order. On the other side, countries which do not follow the

WC policies are arguably penalized through decreasing access to conditional funds.37

The emphasis has been placed on short-term economic growth, fiscal and financial

balance.

Contrary to the development policies of the 1950s and the 1960s, which

focused on progress, modernization and industrialization, the new policies of the

1980s gave importance to the key word of “performance” in a liberal economic order

by ignoring the historical differences of the countries. Some comparative standards

36

John Williamson, “What Washington Means by Policy Reform”, Speeches and Papers (Peterson

Institute for International Economics, 2002). 37

Charles Gore, “The Rise and Fall of the Washington Consensus as A Paradigm for Developing

Countries”, World Development (Vol. 28, No. 3, 2000), p. 793.

12

were defined to measure the performance in all aspects of the economic and social

life such as economic, fiscal, financial, poverty and human development performance

and so on. By following these standards, some countries arguably achieved economic

growth in the short-term and proved the validity of the WC. These standards have

been in return incorporated to the structural adjustment policies.38

Within this

process, the World Bank’s multipillar pension system has been promoted as a

standard and benchmark for Southern countries in the area of pension reforms.

Rodrik argues that financial liberalization and opening up to international

capital flows went much farther than what Williamson had envisaged.39

As the WC

policies favour large financial capital at the expense of smaller ones and the workers,

they have led to the transfer of resources to the rich people and resulted in higher

levels of unemployment and income concentration in the countries of the South.40

During the period of 1980-1998, over forty crises took place only in Latin America

and the Caribbean that resulted in GDP fell by more than 4 per cent.41

There were

also severe financial crises in the East Asia, Russia and Turkey.42

Contrary to the

North, the countries of the South had indeed never had Keynesian welfare state and 38

Gore, 2000, pp. 794-795.

39

Dani Rodrik, “Goodbye Washington Consensus, Hello Washington Confusion? A Review of the

World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform”, Journal of Economic Literature (Vol. XLIV, 2006), p. 974. 40

Alfredo Saad-Filho, “From Washington to Post-Washington Consensus: Neoliberal Agendas for

Economic Development”, in Alfredo Saad-Filho and Deborah Johnston (eds), Neoliberalism: A Critical Reader, (London: Pluto Press, 2005), p. 116. 41

International Labour Organization (ILO), Economic Security for A Better World (Geneva: ILO, 2004),

p. 39. 42

Economic and Financial Crises of 1990-2003: Albania, Algeria, Angola, Argentina, Armenia, Azerbaijan, Bahamas, Barbados, Belarus, Benin, Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria, Burkina Faso, Cameroon, Chad, Central African Republic, Congo, Chile, China, Colombia, Costa Rica, Côte d’Ivoire, Croatia, Czech Republic, Democratic Republic of the Congo, Dominican Republic, Ecuador, Egypt, Estonia, El Salvador, Ethiopia, Finland, Georgia, Guatemala, Guyana, Haiti, Hong Kong (China), Honduras, Hungary, Indonesia, Japan, Islamic Republic of Iran, Jamaica, Kazakhstan, Republic of Korea, Kyrgyzstan, Lao People’s Democratic Republic, Latvia, Lebanon, Lithuania, the former Yugoslav Republic of Macedonia, Madagascar, Mali, Malawi, Malaysia, Mauritania, Mexico, Republic of Moldova, Mozambique, Nicaragua, Niger, Nigeria, Norway, Pakistan, Peru, Philippines, Poland, Romania, Russian Federation, Rwanda, Senegal, Serbia and Montenegro, Singapore, Slovakia, Slovenia, Somalia, Sri Lanka, Sudan, Suriname, Sweden, Taiwan (China), Tajikistan, Thailand, Togo, Turkey, Turkmenistan, Ukraine, Uruguay, Uzbekistan, Venezuela, Zambia, Zimbabwe. (ILO, 2004, p. 40)

13

pension rights. This however did not prevent the WC policies to target the already

limited welfare state applications in terms of poverty-reduction policies in the

Southern world.43

According to Krugman, the Mexican crisis in 1994 was the beginning of the

fall of the WC44

but especially, the East Asian crisis in 1997 launched a new debate

on the WC and the conditions for economic growth in Southern countries. Within

this context, it was argued that uncontrolled growth of speculative financial flows,

fast financial liberalization, lack of government supervision on foreign debt of

national companies led to unsustainable foreign debt in the South and the IMF

bailout packages intensified the problem rather than cooling it down.45

Joseph Stiglitz has argued since then the need for a new paradigm, namely

post-Washington Consensus (PWC), to achieve liberal goals and higher life

standards for people simultaneously by using new instruments to build liberal

markets and to correct the market failures. In other words, for him, focusing on

liberalization, stabilization and privatization is not enough to realize economic

growth, better functioning markets and living standards. Moreover, a new

development strategy is needed to provide more sustainable, equitable and

democratic growth.46

The PWC principles, or second generation reforms, have

included: corporate governance, anti-corruption, flexible labour markets, WTO

agreements, financial codes and standards, prudent capital account opening, non-

intermediate exchange rate regimes, independent central banks and inflation

targeting, social safety nets and targeted poverty reduction.47

As markets are not self-

legitimizing, social protection and redistributive policies are also proposed.48

43

Saad-Filho, 2005, p. 115.

44

Paul Krugman, “Dutch Tulips and Emerging Markets”, Foreign Affairs (Vol. 74, No. 4, 1995), pp. 30-

31. 45

Gore, 2000, p. 799.

46

Joseph E. Stiglitz, “More Instruments and Broader Goals: Moving toward the Post-Washington

Consensus”, WIDER Annual Lecture (Helsinki, Finland, January 1998); Joseph E. Stiglitz, “Towards a New Paradigm for Development: Strategies, Policies, and Processes”, Prebisch Lecture given at UNCTAD (Geneva, 1998a). 47

Dani Rodrik, “After Neoliberalism, What?”, Paper Presented at the Alternatives to Neoliberalism

Conference, (Washington D.C., 2002), p. 9.

14

In order to make markets work, Stiglitz has added some measures of qualified

institutional infrastructure, financial regulation, competition policy and policies to

facilitate the transfer of technology. He has also emphasized the importance of

sustainable development that requires education and health policies to promote

human capital and growth.49

However, the emphasis on health and education should

be considered as an attempt to provide necessary labour force to maintain capitalist

economic relations. Targeted poverty reduction strategies and social safety nets are

also promoted as essential to sustain poor and unemployed people respectively in the

labour market. In fact, the new consensus has not brought a fundamental change to

the old one but aimed to make it more humane50

by guaranteeing the needs of

capitalist accumulation.

It is important to note that although Williamson admitted the disappointing

results of the WC and questioned whether there was still a consensus on three major

issues of fiscal policy, capital account liberalization and income distribution,51

he did

not recede to pursue labour market flexibility. Hence, the poor have been simply left

to their fate. The traditional mechanisms of income distribution, such as imposing tax

on rich to increase social spending for poor, have been considered as irrelevant

policy tools since the rich strata of the Latin American countries has invested in the

developed countries instead of their home countries. Therefore, the only way to

improve income distribution has been to facilitate poor people by educational

opportunities, land reform and micro credit. By this way, they could learn how to live

in a neoliberal market.52

In conclusion, while neoliberalism has not been successful in providing high

level of economic growth and resolving the problems of capital accumulation, it has

48

Rodrik, 2002, pp. 5-6.

49

Stiglitz, 1998, pp. 14-24.

50

Gore, 2000, p. 800.

51

John Williamson, “The Strange History of the Washington Consensus”, Journal of Post Keynesian

Economics (Vol. 27, No. 2, Winter 2004), p. 200. 52

Williamson, 2004, p. 204.

15

been a huge success in creating the conditions for capitalist class formation by four

dimensions of accumulation by dispossession: privatization of all kinds of social

utilities, financialization, the management and manipulation of crises and state

redistributions from lower classes to upper classes.53

In this context, the public

pension systems have been transformed in the Southern countries since the 1980s,

and in this process private pension accounts have been introduced to individualize

risks and serve to financial markets. As the outcome of such policies has been social

exclusion and high level of poverty, the pension debate has practically evolved into

poverty reduction and social risk management questions.

1.4 Outline of the Thesis

On the basis of this overview of Harvey’s and Gamble’s arguments on

neoliberalism with a particular emphasis on the role of state in neoliberal

transformation and their linkage to pension transformation, the following Chapter 2

will elaborate the historical evolution of pension systems by the neoliberal turn. The

period before the neoliberal turn will focus on the development of the pension

systems up to the World War I, the interwar period and after the World War II.

While each had different characteristics, in all of these periods, what was common

was the recognition of basic social security and pension rights. The effective

involvement of the International Labour Organization (ILO), powerful and organized

labour, and the established state role in pension provisions will be detailed as the

basic features of the post-war welfare state consensus. The neoliberal turn by the

1970s economic crisis has created the opportunity for liberals to implement flexible

labour market policies and the privatization of social security provisions. Therefore,

Chapter 2 will explain the global campaign on pension reform which was started by

the IFIs, and especially the World Bank, by using structural funds. The IMF has also

supported pension transformation by conditional loans. Although there have been

many criticisms directed against the World Bank approach on pension systems even

within the IFIs, the pension systems of the countries of the South have been

organized according to Bank’s considerations. The global campaign on pension

53

Harvey, 2006, pp. 151-156.

16

reform fundamentally used population ageing problem to force pension

transformation in the countries of the South; in fact, it was the problem of the

countries of the North. This situation fits well with the argument of Gamble that is

mentioned above. The 2008 global financial crisis and its impact on private pension

systems will also be assessed in this chapter. The following Chapter 3 and Chapter 4

will apply Harvey’s arguments to Chilean and Turkish cases to show how people’s

pension rights was dispossessed in the way of capital accumulation.

Chapter 3 will analyze the dynamics of pension privatization in Chile. Chile,

besides being the first laboratory for neoliberal state formation,54

also implemented a

very radical pension privatization, which constituted crucial turning point for the

neoliberal social security projects. It is important to note that this has been told as a

“success story” for thirty years. This chapter will question whether the radical

pension transformation has ensured a move from an authoritarian regime to a

democratic one in Chile. Hence, the implementation of neoliberal policies as a class

project will be the main consideration of chapter 3. This chapter reflects the

argument of Harvey that neoliberalism is a restoration of class power.

Chapter 4 will examine the pension transformation in Turkey since the 1990s

by paying attention to the involvement of international and national actors. In

addition to the IFIs and the ILO, the role of the European Union (EU) will be

assessed due to the candidacy status of Turkey. This chapter aims to demonstrate that

the pension transformation is an open-ended process. To put it differently, as the

Turkish case illustrates, the neoliberal policies are not implemented automatically

given the fact that the Turkish individual pension system has evolved as a voluntary

pension pillar. Chapter 4 will elaborate the historical specificities of the Turkish case

by focusing on the use of Islamic values to cope with increased poverty and

unemployment.

Thesis study is based on primary and secondary sources. While official

documents, working papers and policy papers of the IFIs, the ILO and the EU are

used as primary sources, academic studies are used as secondary sources. In addition,

two semi-structured face-to-face interviews were made with a high-ranked official in

54

Harvey, 2006, p. 147.

17

the Private Pension Department of the Undersecretariat of Treasury and a trade union

official in Ankara in 2011 and 2012.

18

CHAPTER 2

NEOLIBERALISM, THE PENSION REFORM

AND THE PRIVATE PENSION ACCOUNTS

2.1 Introduction

The private pension accounts constitute a crucial part of the pension system

reform that has been developed since the 1980s within the framework of the

neoliberal transformation in the world. This chapter tries to examine the pension

system transformation in general and the evolution of private pension accounts in

particular from three significant angles: the role of the state, class struggle and the

involvement of the IFIs in the process. It will be demonstrated that the imposed

pension transformation in the South has been one of the best examples of Harvey’s

famous argument that “neoliberalism is a class project” and “neoliberalism is a

project to achieve the restoration of class power to the richest strata in the

population”. In addition to this, Gamble’s argument that “a strong state is needed to

sustain the free market economy” will also be central to the following discussion.

The first section of this chapter will problematize the historical evolution of

the basic characteristics of the social security systems and pension arrangements in

relation to the changes in the development of capitalism from the 19th

century to the

end of the 1970s. As will be discussed, the involvement of the ILO to the process and

the devastating impact of the two world wars on the economic and social conditions

in the Western countries constituted the basic historical determinants in the launching

and the evolution of the pension rights. This section, which is divided into three

subsections that focus on the pre-World War I, interwar and post-World War II

periods, will also discuss the concomitant power shifts within the ILO in relation to

social security.

The second section deals with the collapse of welfare-state consensus of the

post-World War II order and the rise of neoliberal economic policies. This was a

19

period in which the abandonment of full-employment policies and the introduction of

flexible labour market policies appalled the roots of the traditional state-backed pay-

as-you-go pension system and curtailed the power of working class in the struggle

for pension rights. At the international terrain, it is seen that the World Bank has

surpassed the role of the ILO in the transformation of the pension systems and

become the basic promoter of the neoliberal pension reform among the other

international organizations since the 1980s. Problematizing the changing attitudes of

the IFIs in general and the World Bank in particular during the more than four

decades-long neoliberal transformation process, this section will underline the

negative impact of the Washington Consensus policies on the poor and the radical

pension reform examples such as the one in Chile have led to significant

controversies over the pension question even within the defender international

organizations.

In addition to this, the second section also discusses the impact of the 2008

global financial crisis on the ongoing changes within private pension accounts in the

reforming countries. As most of these countries have established new methods and

policies to maintain private pension schemes even in the global crisis environment, it

is concluded that the private pension pillar has been turning into a crucial part of the

pension systems in the world.

2.2 The Historical Evolution of Social Security and Pension Systems

Social security systems have a direct impact on the social and economic

development levels in all countries. Pension system is the cornerstone of social

security and the welfare state since retirement and retirement guarantee have been

among the most important goals of a labour’s life. The welfare state principally

means social security that aims to prevent society from occupational, physical and

socio-economic risks, but also supports people if these risks come true.

20

2.2.1 Pre-World War I

The origin of the first social security system could be found in Germany

during the industrialization period in the 1870s, whereas the roots of welfare state

could be seen in the sixteenth century of Britain. During the feudal era, the social

security needs of the people had been satisfied by traditional structures such as the

families and the churches. Especially, in the sixteenth century, starting from 1531,

Britain had accepted many regulations concerning the social conditions of the poor

people. It was recognized with the most famous British Poor Law of 1601 that

poverty was not totally the result of individual error but also a result of social error.55

Although factory legislation was more advanced in Britain, Germany had

become the first country to make social security legislation.56

Late Industrialization

of Germany in comparison to Britain had been completed in a limited time and had

yielded to a faster increase in the number of urban workers who lived in poor

conditions.57

After Germany was united in 1871, the first chancellor of Germany,

Otto von Bismarck, laid the foundation of social security in the country in order to

improve the conditions of workers. Three laws established the German social welfare

system: the Health Insurance of Workers Law of 1883, the Accident Insurance Law

of 1884 and the Old Age and Invalidity Insurance Law of 1889. The last one

introduced a public, compulsory pension system in Germany. The blue-collar insured

workers, who had at least thirty years of contribution, were entitled to benefits at the

age of 70. Although the life expectancy at this time had been less than 70, it made

Germany the first nation to adopt an old-age insurance scheme.58

It was determined

55

Tom Y. Chin, “The Beveridge Report and the Development of British Social Security”, Journal of Social Science and Philosophy (Vol. 81, No. 11, 1992), pp. 328-329. 56

Asa Briggs, “The Welfare State in Historical Perspective”, in Christopher Pierson and Francis G. Castles (eds.), The Welfare State Reader (Cambridge: Polity Press, 2006), p. 19. 57

Gülbiye Yenimahalleli Yaşar, “Sosyal Güvenlik Sistemlerinin Tarihsel Gelişimi” in Gülbiye Yenimahalleli Yaşar (ed.), Sosyal Güvenlik Sistemleri (Erzurum: Atatürk Üniversitesi Açıköğretim Fakültesi Elektronik Ders Kitabı 2. Ünite, 2012). 58

Sven Jochem, “Germany: The Public-Private Dichotomy in the Bismarckian Welfare Regime”, in Daniel Beland and Brian Gran (eds.), Public and Private Social Policy Health and Pension Politics In A New Era (New York: Palgrave Macmillan, 2008), p. 198.

21

with those laws that the social security was the duty of the state and the state was

obliged to make flat-rate contribution from imperial treasury for each person

receiving a pension.59

Such laws had been brought together in 1911 under the name

of Insurance Law.60

By this way, a comprehensive system of income security, based

on social insurance principles, was established.

The institutionalization of the state-backed social security system in Germany

reflected the fears of Bismarck in those years. Bismarck feared a class war and

wanted to make German social democracy attractive in the eyes of the labouring

classes. German government used social legislation as a means of social imperialism

in order to ensure the integration of the working class to the German national state.61

Chancellor Bismarck searched an alternative not only to socialism but also to

liberalism at the same time. On the one hand, he structured a social security system

in order to alleviate the risks of loss of income due to illness and work injury, and to

provide old-age pension to blue-collar workers; on the other hand he prepared an

insurance program against unemployment.62

German pension system attracted

interest in other European countries, and therefore, Denmark copied it in 1891 and

Belgium in 1894.63

The efforts to create an old-age pension system in Britain that involved

proposals to establish a contributory scheme for old-age/sickness and a universal

scheme for old-age, which had been rejected in 1878 and 1891 respectively, were

concluded successfully in 1908. This was followed by the introduction of the

National Insurance Act in 1911, which consisted of health and unemployment

schemes.64

59

Briggs, 2006, p. 21. 60

Yenimahalleli Yaşar, 2012. 61

ILO, The International Labour Organization and the Quest for Social Justice 1919-2009 (Geneva: ILO, 2009), p. 141. 62

Briggs, 2006, pp. 21-22. 63

Briggs, 2006, p. 19. 64

Chin, 1992, p. 335.

22

2.2.2 The Interwar Period

After the World War I, which brought devastating economic, social and

political impacts on the countries involves, the social insurance schemes were

promoted rapidly in several regions and echoed at the international level. Put it

differently, the interwar period created a suitable environment for the establishment

of international organizations concerning social security matters and labour rights.

The ILO, one of the important post-World War II organizations, was established to

overcome the social and economic problems facing the world in 1919. One of the

first countries to become a member of ILO was Chile 1919 while Turkey was

involved in 1932. The ILO’s first constitution was prepared by the Commission on

International Labour Legislation of the Peace Conference in 1919 and formed part

XIII of the Treaty of Versailles.

According to the first constitution of the ILO, the universal and lasting peace

can be established only if it was based upon social justice, which could be achieved

by the improvement of labour conditions, the prevention of unemployment, the

regulation of labour supply, the protection of labour against risks of injury, sickness

and disease arising out of employment, the abolition of child labour, the recognition

of the principle of equal for work of equal value, the recognition of the principle of

freedom of association, the organization of vocational and technical education and

other measures.65

The representatives of mutual benefit societies and sickness insurance funds

were permitted to participate to the 10th

International Labour Conference in Geneva

in May 1927. Their agenda included the introduction of international regulations for

the economic and health protection of workers. Then, in October 1927, the

International Conference of National Unions of Mutual Benefit Societies and

Sickness Insurance Funds was launched in Brussels. Its name was changed to

International Social Insurance Conference with the widening of its objectives to

include old-age, invalidity and survivors’ insurance. The state-administered schemes

were allowed to be a member of the Conference in 1947 and the name of it was

65

Available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:62:0::NO:62:P62_LIST_ENTRIE_ID:2453907:NO.

23

changed to the International Social Security Association (ISSA).66

The Social

Security Institution from Turkey is an affiliate and Chilean Safety Association67

and

Superintendency of Social Security68

from Chile are associate members of the ISSA

today.

World War I accelerated the evolution of the social insurance mechanisms

due to its destructive impact on the societies. It brought increasing demands from the

people in terms of housing, health and pension. In other words, the World War I

increased the level of public expenditure and necessitated a new form of government

control and administration. In response to this, the plan of social security was

systematized during the International Labour Conference in 1925.

The ILO’s efforts to institutionalize the social insurance were divided into

two phases during the interwar period. In the first phase of 1925-1927, sickness

insurance, which formed the largest part of the production costs, was adopted as the

first priority in order to serve international economic competition. In the second

phase of 1932-1934, old-age, unemployment and survivors’ insurance came into the

agenda as a means of governments’ response to social insurance demands which

were triggered by the economic crisis of 1929.69

The ILO had not indeed invented its model during the interwar period but

utilized the German social insurance model. In those years, although the ILO

committees were full of technical experts such as William Beveridge, the architect of

the British social security system in the post-World War II, the German technocrats

were very active in the Organization. This led the ILO to focus on workers’

solidarity.70

The ILO has been based on dialogue and cooperation between the

government, employer and the worker in the formulation of standards concerning

working condition and other labour matters. As the fascist regimes of the 1930s were

66

Available at: http://www.issa.int/the-issa/history/1927-1990. 67

Asociacion Chilena de Seguridad 68

Superintendencia de Seguridad Social 69

ILO, 2009, pp. 141-143. 70

ILO, 2009, pp. 144-146.

24

clearly incompatible with the triparty model of the ILO due to the worker and

employer delegates’ control by the government, Germany had left the Organization

in 1933.71

This detachment altered the orientation of the ILO significantly. The

United States, where there had been no state-backed social insurance tradition,

became a member of ILO in 1935 with the legal withdrawal of Germany. The

membership of the United States was a part of an international strategy to deal with

the outcomes of the Great Depression followed by 1929 Economic Crisis.72

The Social Security Act of the United States, which combined economic

security with social insurance, was also signed into law on 14 August 1935 within

the framework of the New Deal program of President Franklin D. Roosevelt. The

President founded a legislative committee, the Committee on Economic Security, in

order to respond to the negative impacts of the Great Depression and labour unrest.

However, the request for national pension program came from the organized aged

people instead of organized labour.73

The opinion leaders, who advocated a more

radical, redistributory social welfare policy, were excluded during the member

selection process of the Committee since the main goal was the stabilization of the

economy by the national welfare program, not by the welfare of workers.74

This was

also compatible with the interests and demands of the American capital. The

employers’ representatives were also included in the work of the Committee and they

tried to obtain a federal control over the legislation to regulate competition from rival

companies.75

It was not a coincidence that the legislation of the Act had not taken

ILO standards into account.

The Social Security Act established a system of federal old-age benefits by

enabling several states to make more adequate social security provisions such as

unemployment insurance and means-tested welfare programs in the United States. It

71

ILO, 2009, p. 28. 72

ILO, 2009, pp. 147. 73

Jill S. Quadagno, “Welfare Capitalism and the Social Security Act of 1935”, American Sociological Review (Vol 49, October 1984), p. 638. 74

Quadagno, 1984, p. 640. 75

Quadagno, 1984, p. 641.

25

also formed the basis of the government’s role in providing income security.76

The

Act determined the requirements of monthly retirement benefits. The people 65 and

older, who were no longer working, were entitled to get benefits and the benefits

were calculated by a formula based on cumulative wages during the covered

employment.77

As farm labour, self-employed and employees of religious, charitable

and educational organizations were excluded from the old-age insurance provisions;

nearly half of the working population was not covered by the program.78

In other

words, the old-age insurance program was highly dependent on the payroll

contributions. The Industrial Revolution had not only resulted in migration from

rural to urban areas but also changed the structure of society and family lifestyle so

that the traditional role of family in providing social security had started to change.

The Social Security Act also aimed to respond to those alterations in the US society

and working life.

There occurred also a power shift within the ILO towards the Anglo-Saxon

world during the interwar period with the withdrawal of Germany. This made

explicit with ILO’s moving its operations to Montreal in 1940. As the United States

and the United Kingdom provided about one third of the total ILO budget during the

war time, the ILO became dependent on those leading nations in the new post-World

War II world order. The absence of a powerful international trade union movement

due to the deteriorating impact of the war on the labourers pushed the Organization

closer to the social security ideas and practices of the Anglo Saxon countries. Since

the direct impact of the ILO standards on national social insurance policies was

limited as in the case of United States, the Organization started to play a growing

role through its regional approach. Its underlying aim was to counter its loss of

influence, due to crisis, in Europe.79

Therefore, by moving to Canada, the ILO

became more active in giving technical assistance to the countries of the American

76

Patricia P. Martin and David A. Weaver, “Social Security: A Program and Policy History”, Social Security Bulletin (Vol. 66, No. 1, 2005), p. 2. 77

Martin and Weaver, 2005, p. 3. 78

Quadagno, 1984, p. 634. 79

ILO, 2009, p. 149.

26

continent.80

Its impact on the reorganization of social insurance schemes in Chile has

been related to this.

In 1941, in the Atlantic Charter, United States President Roosevelt and the

United Kingdom Prime Minister Winston Churchill announced that they desired “to

bring about the fullest collaboration between all nations in the economic field with

the object of securing for all, improved labour standards, economic advancement and

social security”.81

Although the basis of social insurance model in Britain traced back to the

early sixteenth century of English Poor Laws, Beveridge Plan, which was based on

the report of Lord Beveridge, was published on 1 December 1942, when the country

was deeply involved in the World War II. The report aimed to provide a universal

social security scheme covering sickness, old-age, unemployment benefits and

family allowances. In 1943, the ILO started to promote this Beveridge model that

had defined social security as contributory benefit programs financed out of public

funds that were raised by taxation.82

The vision of ILO’s original constitution was taken a step further towards the

end of the World War II by the Declaration of Philadelphia during the 26th Session

of the International Labour Conference in 1944. Bretton Woods institutions were

also founded in this year. The declaration strongly expressed the fundamental idea of

the ILO that the “labour is not a commodity”, and called for the extension of social

security measures by cooperation at both national and international level, which

envisaged the cooperation between Bretton Woods institutions and the ILO for the

integration of social and economic policy. The Philadelphia Declaration was

subsequently incorporated into the ILO’s constitution, the basic principles of which

can be distinguished as follows:

- Labour is not a commodity.

- Poverty anywhere constitutes a danger to prosperity everywhere and must be

addressed through both national and international action.

80

ILO, 2009, p. 151. 81

Available at: http://www.atlanticcharter.ca/. 82

ILO, 2009, p. 154.

27

- There should be freedom of association for both workers and employers,

along with freedom of expression, and the right to collective bargaining.

2.2.3 Post-World War II

The end of the World War II altered attitudes toward welfare provisions

significantly. The devastating impact of the war led the governments to extend social

security measures to provide sufficient income for citizens. But the most important

reason of using welfare policies was to regulate labour relations and to keep national

economies operating at maximum efficiency.

The World War II created a second wave of the establishment of international

organizations like the United Nations and the EU. The ILO became the first

specialized agency of the United Nations in 1946. Then, in 1948, the United Nations

General Assembly adopted the Universal Declaration of Human Rights whose

Article 22 recognized the right of social security for all members of the society:

Everyone, as a member of society, has the right to social

security and is entitled to realization, through national

effort and international co-operation and in accordance

with the organization and resources of each State, of the

economic, social and cultural rights indispensable for his

dignity and the free development of his personality.83

The ILO Convention on Minimum Standards of Social Security (No.102),

adopted in 1952, incorporated the idea that every human being had the right to social

security. The convention also classified nine social and economic risks. Medical

care, sickness benefit, unemployment benefit, old-age benefit, employment injury,

family benefit, maternity benefit, invalidity benefit and survivors’ benefit were

arranged as insurance branches against those nine risks. Moreover, Article 28 of the

Convention explicitly stated that old-age pensions should be paid as a life annuity,

namely periodical payment.84

This statement definitely explains why Chile has not

ratified this convention up to now. The private pension system in Chile, which is

83

Available at: http://www.un.org/en/documents/udhr/. 84

Available at: http://www.ilo.org/ilolex/english/convdisp1.htm.

28

discussed in the following chapter, allows people to get an annuity instead of regular

pension payment.

The Article 12 of the European Social Charter, which was announced in

1961, also featured the right to social security.85

All those national and international

attempts and documentary work constituted the framework of social security and

pension right, while the fulfillment of these rights was assigned as the responsibility

of the states.

The peace formula of advanced capitalist countries in the Western world was

based on a comprehensive legal role for the states in providing social security and the

recognition of the formal role of labour unions in collective bargaining and formation

of social policy.86

Moreover, development policies of the post-war period focused on

industrialization that was fed by economic and demographic boom. The devastating

impact of war led governments to cooperate with social forces in building wealthy,

healthy and secure societies. The key to this goal was to support economic

development and industrialization by social welfare policies. It should be noted that,

the role of strong trade unions and left parties were significant in this regard since

they fought for labour rights, minimum wages and social security provisions. The

employers agreed to provide social provisions to a certain extent in order to protect

85

Article 12: The right to social security With a view to ensuring the effective exercise of the right to social security, the Contracting Parties undertake: i)To establish or maintain a system of social security; ii) To maintain the social security system at a satisfactory level at least equal to that required for ratification of International Labour Convention (No. 102) Concerning Minimum Standards of Social Security; iii) To endeavor to raise progressively the system of social security to a higher level; iv) To take steps, by the conclusion of appropriate bilateral and multilateral agreements, or by other means, and subject to the conditions laid down in such agreements, in order to ensure:

a. equal treatment with their own nationals of the nationals of other Contracting Parties in respect of social security rights, including the retention of benefits arising out of social security legislation, whatever movements the persons protected may undertake between the territories of the Contracting Parties; b. the granting, maintenance and resumption of social security rights by such means as the accumulation of insurance or employment periods completed under the legislation of each of the Contracting Parties. (Available at: http://conventions.coe.int/Treaty/EN/Treaties/html/035.htm.)

86

Claus Offe, “Some Contradictions of the Modern Welfare State”, in Christopher Pierson and Francis G. Castles (eds.), The Welfare State Reader (Cambridge: Polity Press, 2006), p. 66.

29

their labour force from getting attracted by the communist alternative in return for

full support from the governments.

Thus, until the 1970s economic downturn, a comprehensive welfare state was

designed on the basis of equality, prosperity and full-employment especially in the

Western countries. One of the most important ingredients of the European integration

process, the Social Europe also contributed to the post-war welfare state.

The welfare state was not seen as an economic burden during post-war

period; instead, it was used as an economic and political stabilizer that generated

economic growth and an acceptable social order.87

Nevertheless, political shifts to

the right and rising costs associated with maturing welfare state created new bases of

organized support that had more liberal inclinations. This shifting base started to

erode the power of organized labour which had ensured an expansionist welfare

policy agenda after the World War II.88

Even before the 1970s economic crisis and the Chilean pension privatization,

famous liberal scholars such as Friedrich A. Hayek and Milton Friedman

complimented the necessity of private pension system to improve individual liberty

and freedom of choice. Their selected books “The Constitution of Liberty” published

in 1960, and “Capitalism and Freedom” published in 1962 reserved a significant part

to the role of state in welfare policies. The latter depicted the details of how a

pension system could be organized privately.

According to Hayek, state welfare activities are a threat to individual liberty

since they require coercive power of governments. While limited security can be

achieved for all people in a free society, the absolute security cannot be achieved.89

As absolute security means more just distributions of resources, it necessitates

a kind of discrimination between people and unequal treatment of people. The

welfare state uses paternalistic power controls on the income of community and then

allocates income to individuals which it thinks they need. There is no place for

competitive experimentation but solely for the decisions of authority. Therefore, the

87

Offe, 2006, p. 67. 88

Paul Pierson, “The New Politics of the Welfare State”, World Politics (Vol. 48, January 1996), p. 151. 89

Hayek, 1960.

30

individuals can no longer exercise any choice in important matters of their life and

future due to the top-down approach to welfare state activities.

Friedman states that traditional pension systems involve two kinds of

redistribution: redistribution from some beneficiaries to others and from general

taxpayers to beneficiaries. The first one occurs between young and old members of

the system. The second one means that some members of the system are paid much

more than their contribution. However, taxing the young to subsidize the old

constitute a threat to freedom. As there is no close link between the contribution and

benefits, the second redistribution takes place. Instead of the traditional pension

model, the individual has to be permitted to buy an annuity from private companies.

Governments should go into business in order to sell annuities. Individual freedom of

choice and competition among private companies would increase the efficiency of

the system. Moreover, the people should have the freedom to make their own

mistakes which means that if a man prefers to live for only today, he cannot be

forced to save for old-age.90

According to Freidman, who sees poverty as a relative matter, there should be

programs to alleviate poverty. But the program should operate through the market

and not distort the functioning of the latter. This problem can indeed be solved by

private charity organizations; however, the extension of state activities in the welfare

area contributes to the decline of these organizations. Hence, he confesses that “one

cannot be both an egalitarian and a liberal”.91

Friedman argues that individuals can best judge for themselves how to use

their resources. However, this argument is based on the presumption that individuals

are well informed about financial markets. Moreover, he recommends paying more

attention to the fundamentals of private pensions instead of bolts of privatization

such as transition costs.92

In addition to Hayek and Friedman, James M. Buchanan and Edgar K.

Browning criticized PAYGO pension system and advocated private pension systems

90

Friedman, 1962. 91

Friedman, 1962, p. 195. 92

Milton Friedman, “Speaking the Truth about Social Security Reform”, Cato Institute Briefing Papers (No. 46, April 1999).

31

in return. The common point of their works is that the PAYGO is understood as a

kind of shifting costs to future generations, and instead of this people should be

allowed to purchase adequate pension protection from private pension companies.93

It should be noted that all four scholars attain governments the role of providing

minimum income to all members of the society. The economic slowdown, budgetary

crises and reduced power of labour have created suitable backdrop for neoliberals to

put their economic policies and social security reform proposals on the top of the

world agenda.

2.3 The Neoliberal Transformation of Pension Systems

The economic crisis in the 1970s brought an end to the post-war economic

growth and the golden age of the welfare state. Although the deepening crisis

increased the demand upon social expenditures, the neoliberals started asking for a

reduced role for the state. Neoliberal economic policies have advocated export-led

growth model, flexible labour market regulations, privatization and the liberalization

of all aspects of the economic life. At this point, welfare state arrangements and

pension systems, which were products of class struggle and full-employment

policies, attracted specific attention and public pension systems became one of the

most important discussion subjects among neoliberals since if this strong connection

between the state and the workers was to be broken, neoliberal agenda would achieve

its underlying aims of class project, strong state in free market economy, and the

restoration of ruling class power. The radical pension privatization model in Chile,

which involved no social consensus at all, became the most significant example of

the neoliberal class project that aimed to dissolve the power of organized labour. The

private pension system, which was settled in Chile by the authoritarian rule of the

state, had gathered the accumulated pension funds of the Chilean people in the hands

of a limited number of pension managers and their affiliates in the world financial

market.

93

James M. Buchanan, “Social Insurance in a Growing Economy: A Proposal for Radical Reform”, National Tax Journal (Vol. 21, No. 4, 1968); Edgar K. Browning, “Social Insurance and Intergenerational Transfers”, Journal of Law and Economics (Vol. 16, October 1973).

32

Economic crisis undermined support for state-led development model, created

domestic capital shortages that put pressure on the finances of public pension

systems, and weakened organized labour that opposed pension privatization and

strengthened international organizations that sought liberal economic and social

policies such as the World Bank.94

Moreover, capitalists and conservative politicians,

by taking the opportunity, exaggerated the economic burden of the welfare state in

order to alleviate the hardships imposed upon the capital and employers by reducing

the constraints of the welfare state provisions.95

According to defenders of the social

security reform, the welfare state provisions had created a dependency culture and

disincentives to work, the welfare-state related costs had led to the squeezing of

profits and caused disincentives to make investment as well.96

Social policy was

viewed as a financial burden for employers in the early neoliberal accounts that its

privatization was promoted as a business opportunity not only in health and pensions

but also in education.97

In the middle of the 1970s, Peter F. Drucker also saw the capacity of pension

funds to trigger economy but put forth another argument of pension fund

collectivism as an alternative to state socialism and free market individualism. By

this way, he announced the United States, where employee pension funds had

potentially acquired a large stake in big corporations, as the first socialist country in

the world. Namely, the means of production were being controlled by the workers, a

practice that constituted the essence of socialism.98

Although he emphasized that the

pension funds should be managed by trustees without any connection with the banks,

94

Raul L. Madrid, “Ideas, Economic Pressures, and Pension Privatization”, Latin American Politics & Society (Vol. 47, No. 2, Summer 2005), p. 24. 95

Offe, 2006, pp. 68-69. 96

Giuliano Bonoli, Vic George and Peter Taylor-Gooby, European Welfare Futures: Towards a Theory of Retrenchment (Cambridge: Polity Press, 2000), p. 97; Offe, 2006, p. 69; Mark Hyde and John Dixon, “Welfare Ideology, the Market and Social Security: Toward a Typology of Market-Oriented Reform”, in John Dixon and Mark Hyde (eds.), Marketization of Social Security (USA: Greenwood, 2001), p. 15. 97

Susanne MacGregor, “The Welfare State and Neoliberalism” in Alfredo Saad-Filho and Deborah Johnston (eds.), Neoliberalism: A Critical Reader (London: Pluto Press, 2005), p. 147. 98

Peter F. Drucker, The Unseen Revolution: How Pension Fund Socialism Came to America (New York: Harper & Row, 1976).

33

intermediaries and employers to pursue employee rights, the liberals realized the

capacity of pension funds in providing additional funds to financial markets, then the

relationship between pension funds and social goals were dissolved irrevocably.99

Significant social, economic and political alterations throughout the world in

the late 20th

century resulted in the spread of neoliberal policies and exposed fiscal

and legitimation crisis of the welfare state at the same time, which led to calls for the

retrenchment of the welfare state. These can be related to changes in the family

structure, population ageing due to decreasing fertility and increasing life

expectancy, shift from manufacturing to services, new patterns of migration,

globalization, weakening of socialist ideas due to the collapse of the Soviet Union,

deepening and widening of the European Union.100

In fact, the economic crisis

created an opportunity for the neoliberal thinking in order to realize their aims and

therefore, the free market has become the dominant idea since the 1970s. As

capitalism requires persistent commodification to accumulate, the introduction of

private pension accounts instead of the public ones has meant a new area to be

opened to capital accumulation.101

In other words, pension funds became a

commodity to be bought and sold in the market102

by forced pension reforms in the

countries of the South with the ostensible purpose of saving the future of pensioners.

Before going through the transformation of traditional pension systems, it is

necessary to notice the differences between public and private pension systems.

Traditional pension systems and private pension systems differ in four points:

administration, financing model, benefit structure and risk allocation. In the former,

the state and/or employers administer collections and benefits, the pensions are

financed through pay-as-you-go system, benefits are defined in advance and the

system is based on redistribution within and between generations, risks are pooled. In

the latter, the private pension companies administer individual pension savings,

99

Robin Blackburn, Banking on Death: Or, Investing in Life: The History and Future of Pensions (London, New York: Verso, 2002), p. 12. 100

MacGregor, 2005, p. 143. 101

Harvey, 2003, p. 141. 102

Blackburn, 2002, p. 5.

34

financing model is pre-funded, benefits are not pre-determined but depend upon

investment returns and there is little or no redistribution within and between

generations, thus risk and reward are individualized.103

2.3.1 The International Coalition

Until very recently, the notion of social security used to be considered

politically untouchable and morally sacrosanct.104

However, in the last twenty years,

privatization of social security and pension systems has become politically

acceptable. Following the 1970s economic crisis, the IFIs have started to promote the

private pension accounts to ensure the sustainability of the public finances, one of the

components of which was cutting pension expenditures. Their reform proposal is

compatible with the neoliberal turn in the world and has basically involved the

changing of the financing system from pay-as-you-go to funded scheme, reduction of

the scope and coverage of the public pension scheme and shifting of risks from

public to individuals. The liberals believe in the benefit of crises to introduce drastic

measures that are resisted due to redistributional concerns.105

Pay-as-you-go, in its strictest sense, is a method of financing whereby current

outlays on pension benefits are paid out of current revenues from an earmarked tax,

often a payroll tax. According to the mainstream approach, publicly administered

pension systems which are based on PAYGO model are unsustainable in the era of

population ageing and involve political risk. Therefore, there should be a necessary

trend to scale down the role of the state in pension service. Although the privatization

of the pension system has been recommended from both IFIs and many scholars,

privatization ironically requires state intervention in order to provide necessary rules

and regulations and monitoring of the system. The state has been forced to be an

103

Mitchell A. Orenstein, “The New Pension Reform as Global Policy”, Global Social Policy (Vol. 5, No. 2, 2005), pp. 181-182. 104

Daniel Shapiro, “The Moral Case for Social Security Privatization”, Social Security Choice Paper (No. 14, October 1998), p. 8. 105

Allan Drazen and Vittorio Grilli, “The Benefit of Crises for Economic Reforms”, The American Economic Review (Vol. 83, No. 3, June 1993).

35

agency of customer protection with pension privatization after having been the

provider of social security for a very long time.106

In sum, population ageing, the

sustainability of pension systems and the inefficient involvement of the state in

providing social security constitute the main arguments of the international

organizations to impose pension reform and the introduction of private pension

accounts.

Though the fundamental objective of a pension system is to provide old-age

income security, the campaign on pension reform aimed to link the pension funds to

economic growth. In reality, the underlying reason has been to create additional

funds that would be exchanged in the financial markets.

In order to understand the political forces behind the pension transformation,

in addition to the global actors, lobbying efforts of the domestic insurance

companies, financial intermediaries and banks should also be noted. They are eager

to lobby governments to conduct pension system reforms owing to their vested

interests in more private savings. On the other side, governments distort public

pension policies to get the support of the lobbyists. The latter should absolutely

compensate governments for the loss of electoral support.107

In this process, two

coalition groups, one supporting and the other opposing the pension reform process,

have emerged. While the World Bank, the IMF, the OECD, the USAID, the IDB and

ADB belonged to the former, the ILO and the ISSA belonged to the latter group. The

neoliberal economic integration in the European Union, which started in the 1990s,

also affected the pension reform processes in the candidate countries or recent

members, the Eastern European ones being the most notable ones.

At this point, it should be asked how global actors have become so effective

in the pension reform process. Although transnational actors do not have formal veto

power, their influence can be explained by the quasi-veto powers, which are gained

106

Patricia Frericks, “Marketising Social Protection in Europe: Two Distinct Paths and Their Impact on Social Inequalities”, International Journal of Sociology and Social Policy (Vol. 31, No. 5/6, 2001), p. 327. 107

Achim Kemmerling and Michael Neugart, “Financial Market Lobbies and Pension Reform”, European Journal of Political Economy (Vol. 25, No. 2, 2009), pp. 163-165, 168.

36

by loan or membership conditionalities.108

According to Orenstein, other important

reasons can be listed as the unification around a set of policy ideas, sufficient

resources at their disposal, the ability to organize other actors to join a campaign

coalition, the lack of opposing transnational advocacy coalitions and existing crisis

conditions form the intensive intervention of international organization.109

The

World Bank and the IMF, for instance, unified around the Washington Consensus

policies, problematized in the previous chapter, to force the countries of the South, to

make necessary reforms that would yield economic growth in the 1980s. Among the

relevant principles, the reorientation of public expenditure, fiscal policy discipline,

the privatization of state facilities and deregulation of markets have been much

related with the pension reform processes in the countries of the South where no

direct but conditional loans of the IFIs determined the pace of reforms.

In line with Krueger’s arguments, the World Bank chief economist from 1982

to 1986, a necessary reform could take place either a new government comes to

power by election or coup d’état or in the case of economic crisis. She also

emphasized the leading role of the technocratic input that would shape the nature of

the reform.110

As will be problematized later, both conditions and technocratic input

were effective in the radical pension privatization in Chile.

2.3.1.1 World Bank

The interest of the IFIs in the pension reforms was first expressed in the 1994

report of the World Bank, titled Averting the Old Age Crisis: Policies to Protect the

Old and Promote Growth. It was claimed that, the report was designed to find the

optimum answer to the question of what was good for old and good for the economy

as a whole at the same time. Therefore, the population ageing and its impact were

discussed intensively in this study in order to justify the proposed radical reforms. In

fact, the Bank had started to issue conditional loans at the very beginning of the

108

Mitchell A. Orenstein, Privatizing Pensions: The Transnational Campaign for Social Security Reform (New Jersey: Princeton University Press, 2008), p. 55. 109

Orenstein, 2008, pp. 69-70. 110

Anne O. Krueger, Political Economy of Policy Reform in Developing Countries (USA: MIT, 1993), pp. 124-132.

37

1980s during the Chilean pension privatization process; this comprehensive report

was a convincing attempt in justifying pension reform by using a discourse of

population ageing and the sustainability of the pension systems throughout the world.

The timing of the report was also compatible to political, economic and social

conjuncture in the world. On the one hand, it was a time that the Washington

Consensus principles informed new economic reforms especially in the Latin

American countries, while the collapse of the Soviet Union created new and

adolescent clients for the Bank on the other.

According to the report, demographic problems, which were caused by

declining fertility and increasing life expectancy, had increased all over the world.

Moreover, the extended families that constituted the basis of traditional social

security were weakening. Therefore, the World Bank argued that formal pension

systems proved to be unsustainable and difficult to reform.111

The report evaluated

the impact of redistribution, saving and insurance functions of social security

systems on the aged and on the economy as a whole. It was argued that while

“redistribution” would help shift lifetime income from one person to another,

“saving” would postpone some consumption in young age in order to consume more

in the old. “Insurance” would provide protection against the probability of economic

recession or bad investments will wipe out savings. Hence, “[a] country’s old age

security program should provide for all three functions, but with very different

government roles for each”.112

The report appraised policy options for mature social security systems and

suggested three-pillar structure that consisted of a publicly managed pillar with

mandatory participation, a privately managed pillar with mandatory participation and

a voluntary pillar. The first pillar would fulfill redistribution function with a limited

goal of reducing poverty among the old and the second pillar would cover savings.

Besides, first and third pillars would fulfill insurance function. By separating the

redistribution function from the savings function, the public pillar would become

smaller and it would be possible to avoid growth-inhibiting problems. Three-pillar

111

World Bank, 1994, p. xiii. 112

World Bank, 1994, p. 10.

38

structure was arguably organized to share responsibility among multiple pillars of old

age support.

In order to encourage multipillar systems, the World Bank claimed that:113

- One dominant public pillar was not enough for redistribution, saving and

insurance since it operated problematic for both efficiency and distributional

reasons. As the system relied on current workers, the population ageing

would make it unsustainable. When the scheme matured high contribution

rates would be applied to maintain the system, but at that time, the workers

would perceive this as a new tax and prefer informal working.

- Public pillar missed an opportunity for capital market development. On the

contrary, mandatory funded plans would increase long-term saving and

stimulate economic growth.

- Publicly managed funded plans were open to misuse. To invest in only public

securities as a requirement would cause negative or low returns for the

pension funds.

- Privately managed plans were beneficial for capital market development.

Among the other options, private accounts had the least labour and capital

market distortion effects. But, they did not address the poverty problem and

insure against investment risks and capital market fluctuations.

The minimum pension guarantee was seen as the best option for the public

pillar. The private management was recommended for the second, mandatory funded

pillar, instead of public management since the former would have an incentive to

invest in the stock market that would offer the best risk-return combinations.114

In the World Bank study, the OECD, Eastern European countries and several

Latin American economies were rated as older economies with large public pillars.

Concerning to the example cases of this study, Chile and Turkey were strangely

admitted as ageing countries. While the old-dependency ratio115

had been 20.4 per

113

World Bank, 1994, pp. 12-15. 114

World Bank, 1994, p. 17. 115

Old-Dependency Ratio: ((65+) age/(15-64) age)*100

39

cent at average in the OECD in 1990, it had been 9.3 per cent and 7 per cent in Chile

and Turkey respectively.116

In fact, this situation is very compatible with Gamble’s

argument that it is easy for capitalist countries to force neoliberal prescriptions to the

countries of the South instead of themselves. Therefore, the ageing problem was put

forward as an agreeable reason to apply neoliberal welfare policies in the periphery.

Two reform steps were recommended for these ageing economies in order to

achieve a safe transition to mandatory multipillar system. The parametric changes to

transform public pillar, which involve rising retirement age, eliminating early

retirement, downsizing benefit levels and broadening tax base, constitute the first

step. The second step envisaged a structural change in the pension system that could

be accomplished by three options below:117

- Downsizing the public pillar while reallocating contributions to a second

mandatory pillar.

- Holding the public benefit constant but rising contribution rates and assigning

them to the second pillar,

- Starting a completely new system while recognizing accrued entitlements

under the old system.

Although both steps were discussed intensively in the book, the World Bank

approach highlighted the third option that was already realized in several Latin

American countries, among which Chile was the pioneer case. It is explicit that, the

pension privatization model of Chile, which is analyzed in the next chapter, was

embraced by the World Bank. Although the Bank’s model proposed a three-pillar

pension system, the focus was on the second pillar, namely privately managed and

defined-contribution mandatory pillar. The underlying idea was to make public

pension system less attractive. Still however, Bank’s model differed from the Chilean

path to pension transformation by its relatively softer transition to the private pension

system. While Chilean model had been realized by replacing the traditional public

pension system with private pension system, the World Bank assumed their

concomitant co-existence during the transition stage.

116

World Bank, 1994, pp. 343-348. 117

World Bank, 1994, p. 22.

40

The Bank attempted to justify the pension reform by two basic propositions:

the three-pillar structure would protect pension system against the outcomes of

demographic ageing and the fully-funded individual pension accounts would have

the capacity to increase national savings and economic growth at the end.

The World Bank’s publication has become the credo of pension reform

throughout the world since then especially in the countries of the South that have

been confronted by the conditional funds of the IFIs. The World Bank has promoted

the pension reform with several other publications, and technical and financial

support in client countries. As a result, structural shifts in the welfare state provisions

have caused reliance on means-tested benefits, transfer of responsibility to private

sector, and dramatic changes in benefit and eligibility rules.118

Indeed, the Bank’s support for implementing mandatory funded pillar had

started even before the 1994 report. In line with the Washington Consensus

principles, the Bank had assisted Latin American countries in pension reforms in line

with neoliberal economic policies. In this period, most of the Bank’s funds had been

lent to Mexico, Argentina, Peru, Uruguay, Columbia, Bolivia and Ecuador in

respective order.119

But while the Bank’s financial supports to pension reform was

about 416 million dollar during the period of 1984-1994, the next decade it jumped

to the level of approximately 5 billion dollar. Twenty per cent of these loans were

issued for the reforms that involved a dominant second pillar.120

It was not a

coincidence that a large part of the lending took place after the enactment of the

reform. Put it differently, the Bank has guaranteed the implementation of the reform

by its generous loans.

The pension reform has been marketed by the World Bank and financed by

the IFIs and regional banks and organizations such as the IDB, the ADB and the

USAID throughout the world. Chilean example was made a partially model of

intervention firstly in Latin America but then in Peru (1993), Argentina (1994),

Columbia (1994), Uruguay (1996), Bolivia (1997), Mexico (1997) and El Salvador

118

Pierson, 1996, p. 157. 119

Independent Evaluation Group, Pension Reform and the Development of Pension Systems: An Evaluation of World Bank Assistance (Washington, D.C.: World Bank, 2006), p. 66. 120

Robert Holzmann and Richard Hinz, Old Age Income Support in the 21st

Century: An International Perspective on Pension Systems and Reform (Washington, D.C.: World Bank, 2005), pp. 65, 69.

41

(1998), spreading later to the Eastern European countries and former Soviet

Republics such as Kazakhstan (1998), Hungary (1998) and Poland (1998).

2.3.1.2 Criticisms Towards the World Bank Report

The pension reform and mandatory private pension pillar, which was

systematized with the 1994 report of the World Bank, has led to many criticisms

from the academics, ILO and ISSA as well as within the Bank and the IMF. The role

of the post-Washington Consensus debates has been also very significant in the

production of those criticisms. For the repetitious economic and financial crisis

particularly in the countries of the South since the 1990s stimulated neoliberal

coalition to revise the Washington Consensus principles. Regarding the pension

domain, the introduction of safety nets and poverty reduction strategies has been

recommended to the suffering countries.

It has been argued that the 1994 report of the World Bank was the extension

of the IFIs’ top down policies in Latin America, and now the national governments

were forced to implement Bank’s policy on pension systems through authoritarian

measures.121

According to Beattie, “it would seem inconceivable that the Bank’s

pension strategy could be justified on social policy grounds”.122

According to another

point of view, the Bank’s strategy was flawed not only in creating solutions for

sustainable social policy but also in promoting economic growth.123

Blackburn invalidates the population ageing argument with the following

conclusions: As the medical advance has increased life expectancy, the working

years of any individual have also increased; immigration is a likely solution to labour

shortage; the decline in fertility rates has also meant less number of dependents; and

technological advance has been increasing labour productivity continually. Thus, in

the developed Western countries, the basic solution to the sustainability of pension

121

Roger A. Beattie, “Review of World Bank (1994)”, International Labour Review (Vol. 133, No. 5-6, 1994), p. 715. 122

Beattie, 1994, p. 719. 123

Ajit Singh, “Pension Reform, the Stock Market, Capital Formation and Economic Growth: A Critical Commentary on the World Bank’s Proposals”, CEPA Working Paper Series I (No. 2, April 1996).

42

systems is preventing early retirement and decreasing unemployment rates, meaning

that the real challenge is not population ageing but to find compatible economic and

social policies to make necessary adjustments to face with population ageing.124

The radical pension privatization process in Chile and its negative economic

and social impacts on the society have also brought ILO into the pension reform

debate. After analysing the Chilean private pension system in 1992, the ILO

recommended a three-tier pension model to the countries that were similar to the

Chile’s characteristics in terms of the level of economic and demographic

development which should be closely supervised by the state. The model involved a)

a basic minimum guaranteed pension, b) a defined-benefit, earning-related pension

scheme supported by both employee’s and employer’s contribution and working on

the basis of global and partial funded system and c) an optional complementary

scheme. Moreover, it was argued that an additional tier should be supplemented to

provide minimum income to non-contributors.125

This model, which was systematized and announced during the Fifth

Regional Conference of ILO in Warsaw in 1995, advocated a more active role to the

state by proposing a model that assumed a basic pension tier of anti-poverty measure,

a compulsory, defined-benefit, PAYGO social security tier and a voluntary tier

comprising funded personal or occupational schemes. Thus, the ILO model

comprised two state-backed tiers which formed the essence of the system, and one

private but supplementary tier.126

In order to provide a platform to exchange views and share ideas concerning

the polarized debate on the problems of social security and the future of the social

security, the ISSA launched Stockholm Initiative under the title ‘The Social Security

Reform Debate: In Search of A New Consensus’ in 1996. At the request of ISSA, L.

H. Thompson from Urban Institute (United States) developed a series of analysis

124

Blackburn, 2002, pp. 18-19. 125

This analysis is given in the next chapter on the basis of Colin Gillion and Alejandro Bonilla, “Analysis of A National Private Pension System: The Case of Chile”, International Labour Review (Vol. 131, No. 2, 1992). 126

Cited in Roger Charlton and Roddy McKinnon, “Beyond Mandatory Privatization: Pensions Policy Options for Developing Countries”, Journal of International Development (Vol. 12, Issue 4, 2000), p. 485.

43

regarding the pension debates127

and 170 participants came together in June 1998 in

Stockholm to discuss new social security challenges. The appealing participants were

Council of Europe, the European Commission, the ILO, the IMF, the OECD, the UN,

the World Bank and European confederations of trade unions and employers. The

conference was organized by the ISSA and the CISS (Inter-American Conference on

Social Security) and hosted by the Swedish Government. The Conference reached to

the following conclusions:128

- Social protection is a responsibility of the state.

- The aims of social security are to alleviate poverty and to spread risks among

citizens.

- There is a need to balance different interests.

- Each country needs to design its own solution.

The IMF contributed to the pension reform debate with the work of Peter S.

Heller, Deputy Director of Fiscal Affairs Department of the IMF in 1998.

Interestingly he questioned the superiority of defined-contribution private pension

system over defined-benefit public pension system. Like the World Bank papers, the

pension reform was discussed around the population ageing problem but the primary

concern of the study was to explain the inadequacy of the private system in terms of

providing intragenerational redistribution and safety-net, and to correct the failures of

the system that was open to many vague risks of the market in future. Moreover, the

study dealt with the management of fiscal policy, since relying on a mandatory

private pension system would make it more difficult. Therefore, it recommended that

the main source of old-age benefit should arise from the public pillar but in a well-

formulated occasion; thus the private pension pillar should complement rather than

replace the public pillar.129

The internal debates in the World Bank, which were affected by the

observation of country experiences over time, led to another important publication 127

Karl G. Sherman, “A New Social Security Reform Consensus? The ISSA’s Stockholm Initiative”, International Social Security Review (Vol. 53, 1, 2000), p. 67. 128

Sherman, 2000, pp. 67-70. 129

Peter S. Heller, “Rethinking Public Pension Reform Initiatives”, IMF Working Paper (Working Paper No. 61, April 1998).

44

named “Rethinking Pension Reform: Ten Myths about Social Security System” in

1999. Peter R. Orszag and Joseph Stiglitz, Senior Vice President and Chief

Economist of the World Bank, presented their paper during the fifth anniversary of

Averting the Old Age Crisis.

This paper examines ten myths about the World Bank publication in a

provocative manner. The myths, which are grouped as macroeconomic (the first

four), microeconomic (the following three) and political economy (the last three), are

summarized below:130

- Private pension accounts rise national saving. If people only save in

individual private pension accounts and reduce saving in other forms, total

private saving will be unaffected by these accounts. The privatization of the

pension system by switching to individual private pension accounts would

only alter the form of debt. The implicit debt in PAYGO system would

become explicit. Put it differently, the introduction of private pension

accounts would be a kind of debt-financed privatization which would not

yield macroeconomic consequences. Moreover, the costs of this privatization

are put on the shoulders of the savers. On the other hand, prefunding can be

accomplished without privatization in a way that the government can

accumulate assets on the basis of defined-benefit plans to be used for future

payments.

- Rates of return are higher under individual accounts. Only in dynamically

efficient economies this hypothesis would be true. Otherwise, higher returns

in the long run can be obtained at the expense of reduced consumption.

Administrative and transition costs would also decrease the rates of return. If

those costs are financed through tax revenue, the rate of return would

increase. Therefore, the higher rate of return is linked closely to additional

funding not to individual private accounts.

- Declining rates of return on PAYGO systems reflect fundamental problems

with those systems. While early pensioners receive high rates of return in

comparison to their contribution, the subsequent pensioners receive low rates

130

Peter R. Orszag and Joseph E. Stiglitz, “Rethinking Pension Reform: Ten Myths about Social Security Systems”, Paper presented at the World Bank Conference on New Ideas About Old Age Security (September, 1999), pp. 7-37.

45

of return due to the low level contributions of the earlier ones. That decline in

return may be prevented by increasing productivity and growth rates. It has to

be recognized that this myth and the authors’ recommendation form a very

good example of the contradiction inherent neoliberal economic policies,

namely labour market reforms have been forced to make the labour market

more flexible in order to increase productivity. However, labour market

flexibility and informal employment, an inevitable outcome, appalled the

foundation of traditional PAYGO system and made it practically impossible.

- Investment of public trust funds in equities has no macroeconomic effects or

welfare implications. If a pension system relies on partial funding that

combines unfunded and funded component at the same time, risks

diversification can produce macroeconomic effects.

- Labour market incentives are better under private defined contribution plans.

Some measures can also create labour market incentives but reduce welfare

levels. It is hard to calculate the impact of a pension system on the labour

market.

- Defined benefit plans necessarily provide more of an incentive to retire early.

Early retirement is not always related with the pension system. For instance,

technological changes may also diminish the value of human capital and may

encourage early retirement. On the other hand, incentives to retire early could

also be prevented by parametric changes.

- Competition ensures low administrative costs under privately defined

contribution plans. In a decentralized private pension system with many

financial companies, which provide private accounts, the administrative costs

would be higher due to the loss of economies-of-scale and advertising

expenses. The Chilean example has explicitly proved the contrary of this

myth.

- Corrupt and inefficient governments provide a rationale for privately defined

contribution plans. The privatization of pension systems requires a strong

state to monitor and regulate the new system. It is ironic to assume that an

inefficient and corrupt government in administering the pension system

would be efficient in regulating the system. In fact, the financing structure of

46

a pension system does not matter. All pension systems, public or private,

need an effective state. Moreover, as it is detailed in the next chapter, even in

Chile, pension privatization resulted in minimum pension guarantee of the

state.

- Bailout politics are worse under publicly defined benefit plans than under

privately defined contribution plans. The governments are under pressure to

provide social protection in defined benefit plans. However, if the

governments fail to regulate and monitor private pension system effectively,

the individuals who make risky investments would also turn to government

for its assistance. Here the authors frame a very basic internal contradiction of

neoliberalism on the pension reform. Even though one of the most important

aims of the reform is announced as reducing the role of the state, the reform

process actually brings the state at the centre of the new system, reminding

Gamble’s emphasis on the need for a strong state in neoliberalism.

- Investment of public trust funds is always squandered and mismanaged. The

public pension funds with sound corporate governance protections may avoid

some of the pitfalls. The authors also compare the real return on public fund

for selected countries, which was given in the Bank’s 1994 publication, with

the average real ex post discount rate and found that public fund returns have

been at least as good as the market return.

The studies of Heller and Orszag and Stiglitz have emphasized the economic

and social differences between countries and recommended tailor made solutions for

pension sustainability problems. This call has been echoed in the World Bank. The

Head of Social Protection Division of the World Bank, Robert Holzmann, prepared a

report to demonstrate that the Bank took countries’ conditions into account and

assessed all reform options. On this point, the Bank has identified four key concerns

such as short-term financing and long-term financial viability, effects on economic

growth, adequacy and other distributive issues, political risk and sustainability.131

The Bank has also evaluated three main reform options namely PAYGO-only

131

Robert Holzmann, “The World Bank Approach to Pension Reform”, Social Protection Discussion Paper Series (No. 9807, December 1999), pp. 4-6.

47

reform, shift to a fully-funded system, and multipillar pension system within the

framework of these four key issues. The PAYGO-only reform that involves

parametric changes is assessed as politically unattractive. A complete shift towards a

funded pension system may be feasible under certain limited conditions such as low

implicit debt in PAYGO system and low credibility in reform of the unfunded

scheme. The discussion on multipillar pension system is proposed as an inevitable

outcome of observed difficulties of both two previous options. Its superiority results

from risk diversification. Moreover, long-run risks would be balanced under the

multipillar system.132

Therefore, the Bank has continued to favour multipillar

approach, which was already initiated in 1994, but in a country-specific manner.

However, this did not retain the Bank from focusing on second pillar, privately

managed individual pension accounts. The study of Robert Holzmann and Robert

Palacios has made this explicit.133

Nicholas Barr, visiting scholar at the Fiscal Affairs Department of the IMF,

has also followed Orszag and Stiglitz, in order to examine the myths of the proposed

pension reform.134

Their arguments have converged such that private pension system

is a way of prefunding but not the only one because the governments can set aside

resources to meet future pension benefits. The design of the pension scheme is much

more important than the financing of the scheme. Mandatory private pension

accounts do not necessarily increase national saving due to likely decrease in

voluntary saving. The key variable of any kind of pension reform is effective

government. If PAYGO scheme has implicit debt, the mandatory funded scheme has

implicit state guarantee as in the case of Chile. This working paper is very important

since it challenges population ageing argument of foremost studies and emphasizes

the risks facing individual pensioners.

Barr also underlines that while the pension debate concentrates on finance in

terms of ageing problem, the focus should be built on output. Put it differently, the

132

Holzmann, 1999, pp. 7-11. 133

Robert Holzmann and Robert Palacios, “Individual Accounts as Social Insurance: A World Bank Perspective”, Social Protection Discussion Paper (No. 0114, June 2001). 134

Nicholas Barr, “Reforming Pensions: Myths, Truths, and Policy Choices”, IMF Working Paper (Working Paper No. 139, August 2000).

48

policy makers should think how to increase the growth of output instead of a shift

towards funding to solve the ageing problem and its consequences. Therefore, he

concludes that “from an economic perspective, the difference between PAYGO and

funding is second order”.135

It is true that macroeconomic shocks, demographic shocks and political risks

affect all pension systems; however, switch to fully-funded pension schemes would

bring further uncertainties and risks in management, investment, and annuities

market. The first can arise through incompetence and fraud. The second can be

resulted from market fluctuations. And, the variables, life expectancy and the rate of

return, which determine the value of an annuity, involve uncertainty and result in

annuities market risk.136

After 2000, ILO has started recommending two options while agreeing that

there is no single pension design for all countries.137

The first one is a mixture of

defined benefit and defined contribution schemes, and the second one is the

introduction of a notional defined contribution scheme. Four tiers below would take

place in the first one:

- A bottom, anti-poverty tier, means-tested and financed from general

revenues.

- A pay-as-you-go defined benefit tier, mandatory and publicly managed.

- A defined contribution based tier that is mandatory up to a determined ceiling

which would be managed by private pension companies.

- A defined contribution based and voluntary tier which would be managed by

private pension companies.

The second option, the NDC, consists of notional accounts that are

accumulated during the working life. The NDC has a defined contribution character

and the notional accounts are indexed to the rate of growth of GDP or of wages

rather than market rate of interest. The system needs to be managed by the state.

135

Barr, 2000, pp. 8-11. 136

Barr, 2000, pp. 21-24. 137

Colin Gillion, “The Development and Reform of Social Security Pensions: The Approach of the International Labour Office”, International Social Security Review (Vol. 53, No. 1, 2000), p. 62.

49

In its analyses in the 2000s, the ILO has given importance to coverage and

participatory governance regarding pension reform. The objective is to propose

reforms which would simultaneously provide full coverage to all members of the

population with good governance and prevent poverty in old age, while the

adjustment of pension income to inflation is also significant. The ILO has aimed

reform processes with minimum distortion and adverse economic effects. A mixture

of defined contribution and defined benefit schemes would be the optimum structure

for pension systems.138

Management of the systems needs to be structured on the

basis of tripartite coalition; worker, employer and government in order to improve

management, governance and compliance.139

Queisser summarizes the bottom line of

the ILO as follows: “the ILO is fundamentally unwilling to accept systems which

cannot guarantee insured persons with a full contributions record any more than

benefits at the subsistence level”.140

In the 2000s, the ILO has also questioned the real reasons of pension system

crises instead of mainstream argument of population ageing. Similar to Barr’s critics,

the ILO has formulated an important question in its call for a new consensus in social

security: “Does social security face an ageing crisis or does social security face a

globalization crisis?”141

While the employment is the key feature of any kind of

pension system, the globalization exposes whole industries to new competitive

pressures, imposing thus restrictive regulations on the labour market and wages.

Moreover, economic liberalization diminishes fiscal sovereignty of the state, which

means that states cannot intervene in the financing of pension systems adequately.142

In reality, the ILO does not reject globalization. But, the fundamental

argument is that the globalization should create opportunities for all people in the

world. In order to achieve this, the ILO calls for mobilizing global tripartism to build

138

Gillion, 2000, pp. 35-37. 139

Gillion, 2000, p. 45. 140

Monika Queisser, “Pension Reform and International Organizations: From Conflict to Convergence”, International Social Security Review (Vol. 53, No. 2, 2000), p. 37. 141

ILO, Social Security: A New Consensus (Geneva: ILO, 2001). 142

ILO, 2001, pp. 83-84.

50

social dimension of globalization and to develop the concept of a socio-economic

floor. In other words, a fair globalization should be maintained by achieving

universal basic pensions and by extending social security locally, nationally,

regionally and globally.143

Having been influenced by such criticism maybe, Gill, Packard and Yermo

produced a World Bank-published critique of Bank’s advice in Latin America by

posing a very simple question: “has the change left Chileans better or worse off”.

Their finding was also very simple and disappointing that pension privatization

yielded enormous costs to not only Chile but also its successors in Latin America in

the manner of limited coverage and high level of poverty.144

Ultimately, radical pension privatization like the one in Chile was

implemented in practice only in few countries in the 1990s. The general trend has

later been set as combining the first pillar of the traditional PAYGO system and

second pillar of funded individual accounts. The NDC system has emerged as an

alternative for countries willing to keep a large PAYGO pillar. It has been also

understood that switching to fully-funded private pension accounts is not necessary

to deliver the sustainability of public pensions.145

2.3.1.3 World Bank’s New Perspective

The World Bank modified its position concerning pensions one decade after

Averting the Old Age Crisis and created a new perspective in 2005.146

In this

publication titled Old Age Income Support, the Bank did not forgo private pension

pillar, but added a new non-contributory pillar for the lifetime poor. The perspective

143

ILO, A Fair Globalization: The Role of ILO, International Labour Conference, 92nd Session (Geneva: ILO, 2004a), pp. 8, 36-37. 144

Indermit S. Gill, Truman Packard and Juan Yermo, Keeping the Promise of Social Security in Latin America (Washington, D.C.: World Bank, 2005). 145

Louise Fox and Edward Palmer, “New Approaches to Multipillar Pension Systems: What in the World Is Going On?” in Robert Holzmann and Joseph Stiglitz (eds.), New Ideas about Old-Age Security: Towards Sustainable Pension System in the 21

st Century (Washington, D.C.: World Bank,

2001), pp. 90-132. 146

Holzmann and Hinz, 2005.

51

identified the primary and secondary goals of a pension system, criteria for lending

and acceptable reform options.

Primary goals of a pension system were set as adequacy, affordability, and

sustainability and robustness. Therefore, the pension system should prevent old-age

poverty and provide sufficient lifetime earnings. By affordability, the study means

acceptable levels of contribution. The pension system should be sustainable in terms

of promised benefits. Regarding robustness, it was argued that the pension system

must be designed to withstand major economic, demographic and political shocks. In

order to have a robust pension system, the countries should develop and adapt

projections by taking their conditions into account for the long term.147

The secondary goal of the pension system was set as contribution to

economic development. The pension system must be designed to create

developmental effects by minimizing negative impacts or by leveraging positive

impacts. In other words, the system should lessen labour market distortions and

macroeconomic uncertainty or should increase national saving and promote financial

market development.148

The study identified the following seven criteria demanded from the clients in

return for the World Bank’s support to pension reform:149

- Sufficient progress toward the goals of pension system.

- The macro and fiscal environment are capable of supporting the pension

reform.

- An efficient administrative structure to operate the new multipillar pension

system.

- Effective regulatory and supervisory arrangements and institutions to operate

the new pension system with acceptable risks.

- Long-term credible commitment by the government.

- Consensus building through local buy-in and leadership.

- Sufficient capacity building and implementation.

147

Holzmann and Hinz, 2005, pp. 55-57. 148

Holzmann and Hinz, 2005, p. 57. 149

Holzmann and Hinz, 2005, pp. 58-60.

52

After setting goals of the pension system reform and criteria for lending, the

Bank classified acceptable reform options as follows;150

- Parametric reforms that leave the existing structure unchanged,

- Reforms that introduce NDC schemes,

- Market-based reforms,

- Reforms that introduce or strengthen the public defined-benefit or defined-

contribution benefits,

- Multi-pillar reforms.

Parametric reforms included substantial changes in the parameters of the

pension system and eligibility requirements of being retired. Although the Bank

admitted the positive impact of parametric reforms, it also claimed that countries

generally could not fully implement those changes since they were politically

unattractive. Instead, parametric reform could be seen as a crucial precursor to

structural reforms.

It is explicit that, the Bank embraced the Swedish model of pension system

for in a Nonfinancial or Notional Defined Contribution system an individual pension

account is established and indexed to the rate of growth of GDP or of wages rather

than market rate of interest. This reform changes benefit structure from defined-

benefit to defined-contribution but keeps public administration and unfunded nature.

On the one hand the NDC model is consistent with neoliberalism in many

ways as it links contributions with benefits and introduces individual accounts.151

On

the other hand, its potential effects could also be achieved by a classical defined-

benefit formula; therefore, it is “old wine in a rather elegant new bottle”.152

A full market-based reform makes a radical change in the pension system.

The manner of funding is changed from unfunded to pre-funded and there is a move

150

Holzmann and Hinz, 2005, pp. 73-83. 151

John Williamson and Matthew Williams, “Notional Defined Contribution Accounts Neoliberal Ideology and the Political Economy of Pension Reform”, The American Journal of Economics and Sociology (Vol. 64, No. 2, April, 2005), p. 489. 152

Michael Cichon, “Notional Defined-Contribution Schemes: Old Wine in New Bottles?”, International Social Security Review (Vol. 52, No. 4, 1999).

53

from public administration to private administration. Moreover, publicly

administered and unfunded schemes are restricted to the zero or basic pillar with the

aim of poverty alleviation. Chile was the first country that performed a full market-

based reform which also involved means-tested benefits to poor non-contributors and

minimum pension guarantee to low-income people.

Reforms that introduce or strengthen the public defined-benefit or defined-

contribution schemes could be organized by centralized prefunding. While

prefunding is centralized in one government-administered fund, investment

management may be outsourced. The fundamental aim of this reform is to keep

administrative costs low and to keep politics out of investment decision.

Multipillar pension reform, which was introduced by the 1994 report of the

World Bank, as discussed before, had diversified the structure, funding and

administration of benefits. As the original definition of multipillar pension system

had focused on formal sector wages and excluded the situation of poor and low-

income formal sector workers, after one decade, the Bank proposed a new

categorization of pillar in order to include three targeted groups under a zero or basic

pillar. This new pillar is financed through general revenues or budget.

Although the World Bank determined acceptable reform options for lending

opportunity, it also endorsed that the actual reform choice would depend on country-

specific considerations, the situation of existing pension scheme, the reform needs of

schemes and the reform environment.153

The report intended to reassure client countries that the Bank considered the

distinctive characteristics of each country while proposing pension reform and

providing loans. However, it has continued to promote multipillar approach with a

substantial privately-managed individually funded pillar. The financial data justifies

the actual attitude of the Bank towards pension reform such that more than half of the

total loans were issued to the countries that pursued multipillar approach as of

2005.154

In other words, the reformers in Latin America, Eastern Europe and Central

Asia were rewarded much more than the reformers who did not forgo public pension

pillars.

153

Holzmann and Hinz, 2005, p. 84. 154

Independent Evaluation Group, 2006, pp. 65-68.

54

Saad-Filho explains the policy shift in the World Bank from neoliberal

orthodoxy to neoliberalism with human face by the appointment of Joseph Stiglitz as

chief economist of the Bank in 1997 since he is one of the proponents of the new

institutional economics. In fact, he was ejected from the World Bank in 1999, but his

ideas remained influential throughout the world.155

On the other hand, the increasing rate of poverty in the reforming countries as

well as in the world led the ILO to emphasize the responsibility of the state more in

providing social security because private pension arrangements failed to deal

adequately with social risks. Moreover, contrary to mainstream arguments, the ILO

argued that the social security expenditure was necessary to respond the basic needs

of the societies and to overcome poverty and social insecurity.156

The ILO also

defined social security perspective for different stages of economic development.

Thus, it departed from its traditional position of applying same standards to all

member countries.157

Furthermore, the ILO called for global responsibility for social

security in terms of allowing governments to use their fiscal policies in order to

alleviate poverty.158

Therefore, tax competition led by globalization should be

limited to create effective fiscal policies and facilitate the hand of the state in

collecting taxes to finance social security expenditure.

If a general assessment is made, it can be underlined that much of the Bank’s

work concerning pension reform in client countries during the 1990s was influenced

by the key findings of the 1994 report Averting the Old Age Crisis. Then, the

publication of Old-Age Income Security in 2005 redefined the mainstream ideology

of pension reform in a new package for the only difference in this latter study was

the inclusion of a poverty pillar to make the social risk more manageable.

155

Saad-Filho, 2005, p. 117. 156

ILO, “Social Security for All: Investing in Global Social and Economic Development”, Issues in Social Protection Discussion Papers (Discussion Paper No. 16, 2006), pp. 28-29. 157

Remi Maier-Rigaud, “In Search of a New Approach to Pension Policy: The International Labour Office between Internal Tension and External Pressure” in Rune Ervik, Nanna Kildal and Even Nilssen (eds.), The Role of International Organizations in Social Policy: Ideas, Actors and Impact (Northampton, MA: Edward Elgar, 2009), p. 175. 158

ILO, 2006, pp. 30-31.

55

Furthermore, the ILO positioned itself towards a multipillar pension system, so that

there has occurred a convergence between the ILO and the World Bank.159

Three-tier model on pension reform which was advanced by the ILO is less

market-didactic and more-tentative.160

At this point, it is necessary to differentiate

the using of pillar and tier. While pillar model deals with the question of “who

provides the pension”, tier model deals with the question of “what function a pension

serves in old age income security”.161

Put it differently, while the ILO gives

importance to the function of pension tiers in order to fulfil the goal of pension

system, the Bank is interested in the division of responsibility between the state and

the individual.

According to Orenstein, “a policy is global to the extent that policy actors

operating in a global or transnational space are involved in policy development,

transfer and implementation”. Therefore, the pension reform has become a global

policy that has changed the post-war social contract; it has had a significant impact

on a large part of total economy and spread in many countries by the involvement of

the global actors.162

In conclusion, this thesis agrees with Wolfson that the neoliberal approach to

“saving” social security has indeed achieved its ultimate objective of the elimination

of social security. This is so even though neoliberal international institutions such as

the World Bank has moderated their strict neoliberal positions on pension reforms in

the 2000s for the Bank’s change of attitude has been mainly a defensive response to

the aggravating poverty problem in the countries implementing neoliberalism, and

the whole process has ultimately managed to define the pension reform as a

“technical” rather than a political question. This is clear to many critical voices who

159

Queisser, 2000; Maier-Rigaud, 2009. 160

Charlton and Mckinnon, 2000, p. 485. 161

Bernhard Ebbinghaus, “Introduction: Studying Pension Privatization in Europe”, in Bernhard Ebbinghaus (ed.), The Varieties of Pension Governance: Pension Privatization in Europe (Oxford: Oxford University Press, 2011), p. 9. 162

Orenstein, 2005, pp. 180-181.

56

have argued that indeed the solution to the future sustainability of social security

systems is to end neoliberalism and pursue full-employment policies.163

2.3.2 2008 Global Financial Crisis and Private Pension Accounts

The pension reform, which was justified, forced and marketed globally by the

1994 Averting the Old Age Crisis report of the World Bank, has moved to another

stage by the impact of the 2008 global financial crisis.

The crisis environment and its devastating impact on private pension systems

have exacerbated the debate on pension reform. Until 2008 more than thirty countries

implemented pension reform policies in the form of either fully or partially pension

funded systems.164

The financial crisis affected pension systems due not only to

volatility in financial markets but also to the rise in unemployment. The crisis has

also brought a decline in voluntary private pension savings. As the impact of the

crisis on the pension system has depended on the type of pension scheme165

;

unsurprisingly, the fully-funded defined contribution private pension schemes have

been affected more than the others. Moreover, members of the defined-contribution

plans close to retirement and the pensioners who have not annuitized their balances

on retirement have been hit the most.166

In the OECD countries, the private pension accounts have registered losses of

nearly 20-25 per cent with a value of approximately USD 4.5 trillion in 2008. The

funds’ recovery, which is impressive, has started in the second quarter of 2009 but

many pension funds have experienced one of the worst ten-year-return periods on

record. The countries where private pension accounts were invested mostly in

163

Martin H. Wolfson, “Neoliberalism and Social Security”, Review of Radical Political Economics (Vol. 38, No. 3, Summer 2006), p. 325. 164

Mitchell A. Orenstein, “Pension Privatization in Crisis: Death or Rebirth of a Global Policy Trend?”, International Social Security Review (Vol. 64, No. 3, 2011), p. 65. 165

Florence Bonnet, Ellen Ehmke and Krzysztof Hagemejer, “Social Security in Times of Crisis”, International Social Security Review (Vol. 63, No. 2, 2010), p. 60. 166

Bonnet, Ehmke and Hagemejer, 2010, p. 61.

57

equities have experienced the sharpest drops.167

In the pioneer of pension

privatization, Chile, the value of individual pension accounts declined in 2009 from

64 per cent of GDP to 52.8 per cent. Moreover, the average rate of return in the same

year dropped from 20.6 percent to 8.8 per cent.168

2.3.2.1 The Responses of the Reforming Countries

Although there was a contested debate about reverting back towards

traditional pension system and PAYGO financing especially in the Latin American

and Central and Eastern European countries169

during the period of 2008-2010

financial crisis, only two countries, Argentina and Hungary stepped back by de facto

nationalizing private pension accounts and closing down the system respectively. But

it should be noted that no country has adopted mandatory individual private pension

system since 2008.170

In order to recover the crisis effect, countries have followed either

expansionary or contradictory social security expenditure policies. While Eastern

European countries cut or freeze the social security expenditures, additional

resources have been made available for the pension system in Chile.171

Chile had

adopted a solidarity pillar, which is detailed in the next chapter, to provide safety

nets to poor and low income people before the crisis. In fact, this regulation was the

outcome of the radical pension privatization -so not a preparation to a possible crisis-

due to a series of problems such as low coverage, market violations and high

administrative charges. On the other hand, countries like Spain, Australia and Ireland

167

Ariel Pino and Juan Yermo, “The Impact of the 2007-2009 Crisis on Social Security and Private Pension Funds: A Threat to Their Financial Soundness?”, International Social Security Review (Vol. 63, No. 2, 2010), pp. 7, 17-18. 168

Carmelo Mesa-Lago, “Reversing Pension Privatization: The Experience of Argentina, Bolivia, Chile and Hungary”, Extension of Social Security Working Papers (Working Paper No. 44, 2014). 169

Pablo Antolin and Fiona Stewart, “Private Pensions and Policy Responses to the Financial and Economic Crisis”, OECD Working Papers on Insurance and Private Pensions (Working Paper No. 36, April 2009), p. 5. 170

Orenstein, 2011, p. 67. 171

Bonnet, Ehmke and Hagemejer, 2010, p. 58.

58

have pursued policies to allow temporary access to private pension accounts to

alleviate the burden on the members and by this way they have indeed destroyed the

basic logic of a pension system which is long-term retirement saving.172

The crisis

has also encouraged initiatives to promote donor coordination to intervene social

security provisions especially in low-income countries.173

The general trend among the reforming countries was to reduce the

contribution levels for all pillars but especially for the private pillar; to cut-off public

pensions, to increase retirement age and to change indexation rules.174

All provisions

have ultimately led to the deterioration of the pension rights of people.

In order to sustain the private pension systems in the crisis environment, the

reforming countries have especially produced regulatory and supervisory provisions

as well as promotion campaigns to build confidence in private pension accounts.

Selected policy actions in response to the global financial crisis are summarized

below:175

- Monitoring activity has been powered in Chile, Spain and Turkey.

- In Turkey, private pension companies were asked in early 2008 to send their

plans on how to inform participants about market volatility. This warning has

led companies to advice participants about their right to change asset

allocation and advice less volatile funds to new entrants. The tax benefit of

private pension accounts has been increased to convince participants to

continue to save.

- The pension law was amended in Mexico in late 2008 to impose penalties

owing to investment regime violations and to establish a ceiling to fees that

pension fund managers can charge.

172

Antolin and Stewart, 2009, p. 6. 173

Anna McCord, “The Impact of the Global Financial Crisis on Social Protection in Developing Countries”, International Social Security Review (Vol. 63, No. 2, 2010), pp. 38-39. 174

Miroslav Bevlavy, “Why Has the Crisis Been Bad for Private Pensions, But Good for the Flat Tax? The Sustainability of ‘Neoliberal’ Reforms in the New EU Members”, CEPS Working Document (No. 356, 2001), p. 7; World Bank, Pensions in Crisis: Europe and Central Asia Regional Policy Note (November, 2009), Available at: http://siteresources.worldbank.org/ECAEXT/Resources/258598-1256842123621/6525333-1260213816371/PensionCrisisPolicyNotefinal.pdf, pp. 9-11. 175

Antolin and Stewart, 2009, pp. 22-37.

59

- Costa Rica liberalized investment limits and initiated the measure of capital

adequacy and operational risk to reveal the necessity of additional capital

requirements at the same time.

- Thailand made an amendment in investment rules to protect the members and

decided to reduce panic by educating private pension members about

investment concepts such as risk-return, diversification and long-term

investment.

- Chilean social security authority tried to convince people that retirement

savings are for the long term and short term volatility is possible.

- An information campaign that focused on long term benefits of pension

savings was launched in Turkey in 2009.

- Mexico launched a campaign to explain differences between permanent loss

and a mark-to-market drop.

The critical point has been the use of accumulated pension funds for other

purposes such as recapitalization of the banks.176

Liberals, who used the

sustainability of pension systems to justify the pension reform, now appropriated the

future of workers in order to save their banks and capital, and left the solution of

social security problems to a later stage. This outcome fits well to Harvey’s argument

that neoliberalism has been a project to restore the power of ruling classes.

In reality, the financial crisis has been an opportunity to correct the past

mistakes. Although the biggest mistake made has been to link the pension accounts

to the performance of capital markets, some additional arrangements have been

thought of to alleviate the impact of financial crisis such as the introduction of

guarantees for defined-contribution schemes, the enactment of the minimum pension

guarantees for pension systems as an automatic stabilizer, the improvement of

governance and risk management of pension funds. Critical voices have underlined

that an overall reassessment of pension policies is needed to improve the social

security system that should respect equal treatment for all members of the society,

maintain universal coverage, protect against poverty, provide lost income

176

Antolin and Stewart, 2009, p. 7; Pino and Yermo, 2010, p. 27.

60

replacement and guarantee of a minimum rate of return on savings, the last but the

most important, social security system should determine benefits as a right not as an

allowance and the state should remain ultimate guarantor of adequate pensions.177

However, the reforming countries have been also encouraged by the neoliberals to

not to over-regulate in response to the crisis in line with the OECD Recommendation

on Core Principles of Occupational Pension Regulation.178

This regulation suggests

an adequate regulatory framework for private pensions that should be enforced in a

comprehensive, dynamic and flexible way, whereas it is also induced that this

framework should not provide excessive burden on pension markets, institutions or

employers.

Institutionally, while the World Bank has tried to convince international

community by the argument of no pension system is immune from crisis179

and the

traditional pension systems have been affected due to the decrease in contributions;

the ILO has emphasized the extension of social security provision to all to recover

the impact of the crisis as the dissolution of the private pension accounts has been

due to market fluctuations.

2.3.2.2 The ILO’s New Initiative: Social Protection Floor

It can be argued that the 2008 financial crisis has helped ILO to get involved

in the social security and hence private pension debates more intensively and the

organization has enjoyed this opportunity to make calls for social security for all.

During the 98th

Session of the International Labour Conference in 2009, the crucial

role of social protection policies was recognized as important in responding the crisis

and the Global Jobs Pact was called to devote attention for protecting and increasing

employment. The Pact also emphasized the importance of building adequate social

protection for all, drawing on a basic social protection floor.180

Additionally, the

177

Antolin and Stewart, 2009, pp. 12-16; Bonnet, Ehmke and Hagemejer, 2010, pp. 63-65. 178

Available at: www.oecd.org/dataoecd/14/46/33619987.pdf. 179

World Bank, 2009. 180

ILO, Recovering from the Crisis: A Global Jobs Pact (Geneva: ILO, 2009a), p. 3.

61

Social Protection Floor Initiative was adopted to address the global crisis in April

2009.181

Then, in 2010, ILO published member countries’ experiences in extending

social security coverage.182

ILO’s effort to form social protection floors arrived at a

conclusion in 2012 with the introduction of the Recommendation No. 202 that took

“social security an investment in people that empowers them to adjust to changes in

the economy and in the labour market, and social security systems act as automatic

social and economic stabilizers, help stimulate aggregate demand in times of crisis

and beyond, and help support a transition to a more sustainable economy”.183

The

ILO decided to provide guidance to members to establish and maintain social

protection floors as a fundamental element of their national social security systems

and to ensure higher levels of social security to as many people as possible. The

organization also warned that the necessity of basic social security was significant

but the countries should seek for comprehensive social security.184

The crisis has increased the suspects about the efficiency of financial markets

in providing pensions. Moreover, the reform of pension reform in Chile has proved

that pension privatization would have major drawbacks that should be corrected.185

The financial crisis and its negative impact on poverty levels, unemployment, and the

rate of return on pension savings have exacerbated debate on inclusive neoliberalism

and given way to many studies concerning inclusive and sustainable globalization,

and social risk management. However, the private pension system has been kept

largely intact in Chile; only Hungary and Argentina quitted fully-funded private

pension schemes, and some countries in Eastern Europe cut off public pensions.

Therefore, it cannot be argued that the pension privatization is now death. Instead,

181

ILO, Social Security for All: Building Social Protection Floors and Comprehensive Social Security Systems (Geneva: ILO, 2012), p. 76. 182

ILO, Extending Social Security to All: A Guide through Challenges and Options (Geneva: ILO, 2010). 183

Available at: http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_INSTRUMENT_ID:3065524:NO. 184

ILO, 2012, p. 67. 185

Orenstein, 2011, p. 71.

62

according to Orenstein, there would be a trend of rebirth of pension privatization to

create alternative sources of pension saving.186

For the post-crisis fiscal stress means little room for fiscal manoeuvre for

states, forcing them to face less social protection, and more poverty and inequality.187

2.4 Conclusion

The private pension accounts have proliferated especially in the last twenty

years in relation to the pension reform campaign in the world. While the basic

objective of a pension system was to provide comprehensive income security in case

of old-age, sickness, work injury and unemployment, the reform process has

appropriated accumulated pension capital of workers by arguments of population

ageing problem and the sustainability of pensions.

Historically, the industrialization process, two world wars and their economic

and social destructive impact on the societies contributed to the evolution of social

security and pension rights in the first half of the 20th

century. This process reached

its highest level thanks to the organized labour after the World War II for the pension

issue was institutionalized as a fundamental political right to be protected and

supplied by the states.

The 1970s economic crisis changed the post-war welfare state consensus, and

pension systems, like other social policy areas, have become subject to privatization

demand. The Chilean radical pension privatization was eagerly embraced in this

period by the World Bank. Although the ILO was sceptical of pension privatization,

its influence was limited to its resources and weak conditionalities. Hence, the IFIs

have started executing a neoliberal project by using their structural adjustment

programs and conditional loans in the countries of the South. It is interesting to

underline that the pension privatization model was more powerfully induced to the

South without significant ageing problem rather than to the ageing Northern ones. As

a result, the private pension accounts of the former have become a financial tool in

the hands of big players.

186

Orenstein, 2011, p. 75. 187

Pino and Yermo, 2010, pp. 25-27.

63

The pension transformation in more than thirty countries has produced high

level of unemployment, substantial poverty and a huge population with no pension

guarantee. States have been forced by the international lobby, which was formed by

the IFIs and the regional banks, to establish private pension pillars in exchange of

necessary loans. The role of the state has been defined as to prevent oppositions of

workers and poor people and to alleviate conditions of the capital accumulation

through private pension arrangements.

Increasing criticisms towards the World Bank project have led the Bank to

make some revisions in its position. However, the outcome was not to step-back, but

only to supplement poverty pillar in order to make the poverty problem manageable.

Besides, in the course of time, the arguments of the actors of counter coalition have

converged with the proponents of pension reform in terms of likely effect of private

pension pillars on the national economy. It can be argued that the biggest

achievement of the neoliberals in this process has been to turn the pension issue into

an aging- and efficiency-focused technical problem rather than a political one

determined by conflicting class interests.

Even the devastating impact of the 2008 global financial crisis on the private

pension accounts, unemployment and poverty levels have not changed the priorities

of the neoliberal agenda that the accumulated pension funds have been used to save

the banks while the situation of people has deteriorated by the cut-off public pensions

and by complicating retirement eligibility rules. Thus, the future of pension systems

have simply been tied to the fate of financial markets, while the future of the poor

and the middle and low income people have been left to the mercy of their

governments and the IFIs, proving Harvey’s argument that the neoliberal pension

reform has been an effective tool of neoliberalism as a class project favouring the

capital at the expense of labour.

64

CHAPTER 3

PENSION PRIVATIZATION IN CHILE:

How and Why It Became a Model?

3.1 Introduction

The close relationship between neoliberalism and the evolution of private

pension accounts has been discussed in the previous chapter. While the processes of

Washington and post-Washington Consensus were the main determinants in this

process, the fundamental tools of the pension privatization have been the

requirements of structural adjustment programs which are enforced by the IFIs. This

chapter will problematize these arguments by focusing on the Chilean case.

Concerning the subject matter of this thesis, it is vital to understand the

pension privatization in Chile since it has been told as a “success story” for 30 years

while the model adopted was unique not only regionally but also worldwide.188

Still,

the Chilean model has inspired reforms in other Latin American countries as well as

the former communist regimes in the Eastern Europe and the former Soviet

Republics.

The Chilean example is important for not only was it the first example of

pension privatization but also it was realized before the worldwide pension reform

campaign of the World Bank. This chapter aims to look at the phases of pension

system transformation in Chile in the last thirty years, as this might help us

understand the changing approaches to the pension system reform both within the

country and international organizations. At the national level, the move from an

authoritarian regime to a democratic one slightly altered the implementation of the

pension system in Chile. At the international level, the settled position of the ILO in

promoting social security standards throughout the world as well as in Chile was

188

Monika Queisser, “The Second Generation Pension Reforms in Latin America”, OECD Ageing Working Papers (Working Paper No. 5.4, 1998), p. 16.

65

eclipsed by structural adjustment programs of the IFIs, most prominently the World

Bank. After evaluating the assumptions and real outcomes of the reform, this chapter

will argue that the Chilean model of pension privatization can be interpreted as one

of the best examples of neoliberalism as a class project. In other words, the main goal

of neoliberalism that Harvey summarized as the restoration of class power might

easily be observed in Chile in relation to the pension system.

Chile became the laboratory of neoliberal policies since the introduction of

market-oriented structural reform after the 1973 military coup. The opening of the

economy was supported by massive privatizations and deregulation. The main items

of the structural reform agenda were a) trade liberalization by abolishing import

licenses and by eliminating of quantitative restrictions, b) privatization of state-

owned enterprises and banks, c) fiscal reform by introducing value-added tax, d)

financial reform especially by eliminating interest rate controls and e) social security

reform by replacing PAYGO system with individually capitalized system run by

private administrators.189

The last item constitutes the subject of this chapter since the new Chilean way

of social model and pension system has been later promoted by the IFIs as the ideal

neoliberal solution to the problems of pension sustainability in the world. So, in an

attempt to understand how the pension privatization was defined and promoted

politically in Chile, this chapter will summarize, first of all, the characteristics of the

pension system of Chile before the reform process. The main questions

problematised will be whether it was really necessary to make some changes in the

pension system and whether there was any attempt to make reform in social security

policies before 1973. Then, the dynamics of the privatization process will be

questioned with reference to its aims, expected results, main actors and advocates,

and the actual winners.

Lastly, the chapter will focus on reform of the reform in 2008, which was

realized after the election of President Bachelet. In this section, the main questions

asked will be whether it was necessary to make a reform of reform, whether there

was any difference between the approaches of the Pinochet period and centre-left

189

Sebastian Edwards, “The Chilean Pension Reform: A Pioneering Program”, in Martin Feldstein (ed.), Privatizing Social Security, (Chicago: University of Chicago Press, 1998), p. 34.

66

coalition era in terms of the reform logic and whether the changing attitude of the

World Bank and the ILO was effective on the reform of the reform or not.

3.2 Pension Privatization in Chile

In this section, the main characteristics of the pension system of Chile during

the democratic regime of 1932-1973 will be identified. Then, the privatization of the

system under Pinochet’s authoritarian regime will be analyzed in relation to its

liberal underpinnings. The assumptions of the pension reform and its real outcomes

will be also discussed.

3.2.1 The Pension System Before 1973

Chile was the first country in Latin America which had an organized social

security system even in the 1920s. The pension system was adopted in 1924 and

developed with the help of the ILO.190

The requests from Latin American countries

to assist their social insurance schemes created a great opportunity for ILO’s experts

to diffuse their knowledge and expertise.

Chile had promptly ratified the ILO Convention No.35 Old-Age Insurance

(Industry, etc./1933), Convention No.37 Old-Age Insurance (Agriculture/1933) and

Convention No.38 Invalidity Insurance (Agriculture/1933) on 18 October 1935.191

These conventions determined that “the insurance scheme shall be administered by

institutions founded by the public authorities and not conducted with a view to profit,

or by State insurance funds”192

, “the public authorities shall contribute to the

financial resources or to the benefits of insurance schemes covering employed

190

Robert J. Myers, “Privatization of Chile’s Social Security Program”, Benefits Quarterly (Vol. I, No. 3, 1985), p. 27. 191

Available at: http://www.ilo.org/dyn/normalex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102588. 192

Available at: http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_INSTRUMENT_ID:312180:NO.

67

persons in general or manual workers”193

, “the insured persons and their employers

shall contribute to the financial resources of the insurance scheme” and

“representatives of the insured persons shall participate in the management of

insurance institutions”.194

In 1942, the first Inter-American Conference on Social Security was held in

Santiago at the invitation of Chilean minister of Public Health, Social Insurance and

Assistance, Salvador Allende (1938-1941). He was the chairman of the Workers’

Insurance Fund in Chile at the time of the conference. The declaration of the

conference specified the connection between social and economic security, and

confirmed the role of social security as an instrument of solidarity to all peoples in

their pursuit of well-being. After the conference, a Permanent Inter-American

Committee on Social Security was established and became permanent counterpart of

the ILO in Latin America.195

The Chilean pension system had evolved on the basis of universalism and

redistribution during the period of democratic regime in 1932-1973 under the light of

these mentioned ILO conventions. Arguing that there is a strong relationship

between development model and welfare regimes, Kurtz maintains that in the case of

Chile, the import-substitution industrialization model was based on production for a

protected national market and the welfare regime linked to formal employment. The

outcome was universalistic consumption support coupled with asset redistribution.196

Put it differently, the Chilean social policy had evolved according to the

requirements of the industrialization process. For this reason, the social policy

193

Available at: http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_INSTRUMENT_ID:312182:NO. 194

Available at: http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_INSTRUMENT_ID:312183:NO. 195

ILO, 2009, p. 153. 196

Marcus J. Kurtz, “Understanding the Third World Welfare State after Neoliberalism The Politics of Social Provision in Chile and Mexico”, Comparative Politics (Vol.34, No. 3, April 2002), pp. 294-296.

68

created necessary human resource by public education, public health programs, state-

financed housing, and pay-as-you-go social security.197

There was a diversified pension system in Chile before 1973 for more than

thirty occupational groups tough majority belonged to three programs for

government employees, salaried employees and manual workers. Each program had

different characteristics in terms of benefit levels, indexation rules, and requirements

of retirement, contribution rates and management type.198

70 per cent of the people

were under the social security coverage through more than 160 different funds,

which were regulated by more than 2,000 laws and regulations in the 1970s.199

While

the pension system offered wide coverage for all social risks, at the same time, it was

the most fragmented system of Latin America due to clientelistic links between the

employees and political parties.200

Trade unions had also strong power to bid for

social policy provisions.

In 50 years, the traditional PAYGO pension system entered into a crisis due

to discriminatory applications and faced with financial obligations owing to design of

pension schemes.201

Myers summarized that the main problems of the former

Chilean pension system were due to a) many different systems for occupational

groups (lack of equality and justice), b) duplication of benefits, c) low retirement

ages, and d) finance techniques.202

Changing demographic conditions also

necessitated a reform in the pension system. However, it was not easy to make

reform in this system as the pension regulations were considered to be one of the

197

Andrés Solimano, Chile and the Neoliberal Trap: The Post-Pinochet Era (New York: Cambridge University Press, 2012), pp. 93-94. 198

Barbara E. Kritzer, “Privatizing Social Security: The Chilean Experience”, Social Security Bulletin (Vol. 95, No. 3, Fall 1996), p. 45. 199

Silvia Borzutzky, “From Chicago to Santiago: Neoliberalism and Social Security Privatization in Chile”, Governance: An International Journal of Policy, Administration, and Institutions (Vol. 18, No. 4, October 2005), p. 657. 200

Evelyne Huber, “Options for Social Policy in Latin America: Neoliberal versus Social Democratic Models”, in Gosta Esping-Andersen (ed.), Welfare States in Transition: National Adaptations in Global Economies (London: Sage Publications, 1996), p. 148. 201

Edwards, 1998, p. 37. 202

Myers, pp. 27-28.

69

most important achievements of the Chilean people ensured by the country’s very

unique democratic culture and system. Moreover, the labour had substantial power

over the members of Congress203

that they were capable of opposing any losses in

the pension system.

Several reform attempts which attempted to make the pension system more

egalitarian and more sustainable during the Eduardo Frei Montalva administration

(1964-1970) and Salvador Allende administration (1970-1973) did not come to an

effective conclusion owing to the opposition of privileged groups. In other words,

“past attempts to reform pension by democratically elected regimes had failed”.204

The neoliberal revolution, initiated by the military coup of General Augusto

Pinochet, changed all aspects of the state-society relations in Chile. Pinochet regime

started to follow market-oriented structural reforms where the shift away from import

substitution industrialization to export-led growth model necessitated a radical

change in labour market relations as well. The role of social policy reform was

significant in making labour market more flexible and in creating additional funds in

the economy. Therefore, Pinochet regime applied shock therapy to social provisions

in order to cut social expenditures in a very limited time which meant that the

pension rights, which were organized under state guarantee, were attacked inevitably

without any social consensus. The reform process in the social security structure

resulted in the privatization of pension and health systems in 1981 dramatically. The

outcome was the deterioration of core social security principals of universality,

equity, social solidarity, efficiency and sufficiency.

3.2.2 The Privatization of the Pension System (1981)/Pinochet’s Authoritarian

Era

According to Huber, economic policies formed an integral part of the political

project that was pursued by the military government under General Pinochet, who

took the power in Chile with the military coup of 1973, because the main goal was to

203

Borzutzky, 2005, p. 657. 204

Silvia Borzutzky, “Pension Market Failure in Chile: Foundations, Analysis and Policy Reforms”, Journal of Comparative Social Welfare (Vol. 28, No. 2, 2012a), p. 105.

70

weaken the labour and the left. Therefore, “austerity and adjustment measures went

even further than the IMF demanded”. By this way, the regime started to take steps

in transforming the society where there would be no basis for collective action.205

Huber’s argument throws a light to the question of why pension system was

privatized radically in Chile. For the privatization brought the individualization of

the pension system and eliminated the collectivist feature of the state-backed social

security.

Although a comprehensive neoliberal economic program was started after

1973 military coup, the liberal seeds had been planted in Chile by the Cold War-

related assistance programs. In the 1950s, the best economics students of

Universidad Catolica in Santiago were sent to complete graduate study in University

of Chicago where Anglo-Saxon economics was thought. The education of Chilean

students at the University of Chicago was financed by the USAID. The education

agreement between the two universities, which was signed in 1956, noticed the need

for the expansion of market ideas in Latin America.206

The Chilean economists,

named Chicago Boys in general, returned their country with a full belief in market

fundamentalism and a set agenda on how to apply free-market approach to Chilean

economic policy.207

General Pinochet was provided consultancy by a group of businessmen,

lawyers and economist while restructuring the national economy.208

It was not a

coincidence that the opinions of social forces were not obtained. Pinochet’s

government pursued export-led development model instead of import substitution

industrialization, imposed anti-inflationary policies and started privatizing state-

owned companies after taking the power. However, the stabilization program was not

proved to be successful in reducing inflation. Chicago Boys held only advisory

positions up to 1975. In this year, the government searched for another program and

205

Huber, 1996, p. 164. 206

Borzutzky, October 2005, p. 658. 207

José Pinera, “Chile”, in John Williamson (ed.), The Political Economy of Policy Reform, (Washington, D.C.: Institute for International Economics, 1994). 208

Pinera, 1994, p. 225.

71

reorganized its economic cabinet to increase the efficiency of decisions. Chicago

Boys were appointed to important roles in the economic management. The father of

the Chicago School, Milton Friedman, came to visit Chile to give a series of lectures

on inflation and economic problems in the same year.209

This gives very preliminary

initials on how Chile and Chilean economy were blockaded by famous liberals and

their students.

Regarding the pension privatization, while neoliberal economists, the IFIs,

the financial sector, private companies and employers’ associations formed driving

forces of process, trade unions, left-wing political parties, the social security

bureaucracy and pensioners’ associations opposed it.

Before the privatization, during the period of 1974-1979, some parameters of

the pension system were changed in order to eliminate the differences between

public pension programs. For instance, a) contribution rates were reduced, b) the

retirement age was standardized, c) a minimum period of 10 years’ contributions was

established for entitlement to an old-age pension, d) an automatic readjustment

mechanism was created to keep pace with inflation, e) benefits for dismissal and

compensation for years of service were also eliminated.210

Although some groups,

and even some statist generals, opposed the paradigm shift, all of these reactions

were ignored by the Pinochet regime.211

Pinochet’s authoritarian regime dissolved

groups of opponents by crushing trade unions and by suspending political and civil

rights.212

On the other hand, Iglesias-Palau argued that those parametric reforms may

have helped to decrease political resistance to the total privatization of the pension

system.213

209

Josephine B. Reinhardt, “Los “Chicago Boys”: A Powerful Exchange of People and Ideas between Chile and Chicago”, Bates College Honors Theses (Paper 41, 2012), pp. 82-84. 210

Augusto Iglesias-Palau, “Pension Reform in Chile Revisited What Has Been Learned?”, OECD Social, Employment and Migration Working Papers (Working Paper No.86, 2009), p. 23. 211

Stephen J. Kay, “Unexpected Privatizations: Politics and Social Security Reform in the Southern Cone”, Comparative Politics (Vol. 31, No. 4, July 1999), p. 409. 212

Carmelo Mesa-Lago and Katharina Muller, “The Politics of Pension Reform in Latin America”, Journal of Latin American Studies (Vol. 34, No. 3, August 2002), p. 690. 213

Iglesias-Palau, 2009, p. 23.

72

José Pinera, a professor at Catholic University of Chile, was appointed as the

Minister of Labour and Social Security in 1978. A team of Chicago Boys, led by

Minister Pinera, worked on a structural reform of the pension system which meant

the replacement of traditional PAYGO system with fully funded privately managed

individual pension accounts based on defined contributions. As a result, the

privatized social security plan was launched on a very meaningful day, 1 May 1981.

Pinera defined pension sustainability problem as an opportunity to empower

and to liberate workers by privatizing their pension rights. By this way, workers were

arguably authorized to make decision on their pension capital, and given a chance to

play in the free market to benefit from economic gains. At the same time, pension

privatization was to serve to the redistribution of power from state to civil society.214

Therefore, the new system was declared on the Labour Day as a benefit to the

workers.215

Like Pinera, the proponents of the reform claimed that pension privatization

was based on principles of freedom, free market and small state. In other words,

people would enjoy freedom to choose and to decide on their future. The reform

would increase the role of private sector, foster the development of financial market,

provide sustainability of pension systems, increase domestic saving rate and trigger

economic growth. Moreover, the state would have a subsidiary role in order to

maintain means-tested benefits to disadvantaged people. Among these liberal

principles there was no place to collectivist values, social solidarity and the

economies-of-scale. Borzutzky argues that the regime used the language of freedom,

modernity and neutrality of the market to convince people during the privatization of

the pension system, but, at the same time, it eliminated all political freedoms and

violated human rights.216

Mesa-Lago and Muller made a comparative analysis to measure the

relationship between the degree of democratization and privatization at the time of

reform in selected Latin American countries. In fact, the result was very simple. The

214

José Pinera, “Liberating Workers: The World Pension Revolution”, Cato’s Letter (No. 15, 2001). 215

José Pinera, “Empowering Workers: The Privatization of Social Security in Chile”, Cato’s Letter (No. 10, 1996), p. 11. 216

Borzutzky, October 2005, p. 656.

73

less democratic a regime at the time of reform, the more it privatize the public

pension system like in Chile.217

The roots of Pinera’s arguments, in particular, and Chicago Boys’, in general,

could be easily found in the works of famous liberals, Friedrich A. Hayek and Milton

Friedman, which was detailed in the Chapter 2. Hayek and Friedman’s emphasis on

freedom of choice and a smaller role for state in welfare redistribution determined

the way of Chicago Boys in privatizing the pension system and transforming state

and society relations in terms of welfare redistribution.

Specifically on Chile, Friedman argues that the growing welfare state in Chile

during the Allende administration formed the totalitarian rule of the left and

necessitated a military takeover in order to solve economic and social chaos in the

country. The Allende regime tried to make a good thing but in a wrong way since the

welfare state eliminated freedom and used force to take people’s money away from

them. A growing welfare state created a clear division in society between

contributors and recipients. Increased tax burden on people and increased amount of

government spending regarding public pension system dragged the country to the

high levels of inflation. All these problems were solved by the change of regime.218

3.2.2.1 New Private Pension System

The pension reform basically replaced the former system with individualized

mandatory private pension system. While the former founded upon the tripartite

contribution (state, employer and employee), the latter created a new relationship

between the individual and the private pension company.219

The public pension

system was closed and new entrants were forced to enter the new system.

217

Mesa-Lago and Muller, August 2002, pp. 706-707. 218

Milton Friedman, “The Fragility of Freedom”, in Meyer Feldberg, Kate Jowell and Stephen Mulholland (eds.), Milton Friedman in South Africa; His Visit to the Graduate School of Business University of Cape Town (Cape Town: University of Cape Town, 1976), pp. 3-10. 219

Marcus Taylor, “The Reformulation of Social Policy in Chile, 1973-2001: Questioning a Neoliberal Model”, Global Social Policy (Vol.3 No. 1, 2003).

74

As attracting foreign capital to the country is the crucial point of neoliberal

economic policy, redistributive policies were ignored not to raise risk perceptions of

investors.220

Moreover, the state was considered to be utterly inefficient by the

neoliberals that the market oriented reform pursued by Pinochet regime neglected

state-led redistributive social policies.

The new system, based on individual private accounts, was managed by

private pension companies known as administradoras de fondos de pensiones

(AFPs). Those already insured in the public system were given six months to choose

between public and private one. The government launched a huge publicity

campaign in order to provide massive switch by proposing lower contribution in the

private system.221

Basically two instruments were used to convince people to switch

their system. Firstly, the contribution rate was reduced by lowering the total rate of

pay-roll tax on the income of workers, which meant a substantial increase in the take-

home pay. Secondly, the recognition bonds were given to workers who changed to

the AFP program. These bonds represented the periods of contribution in the public

pension system and were guaranteed by the Treasury and paid when the member

retires.222

Interestingly, the armed forces/police had a special pension program and

they were not convinced to change this. Self-employed also stayed in the public

system.

The workers were switched to the new program very fast. By the end of 1982,

about five hundred thousand people were still paying to the public pension system

while it was about two million in 1980.223

In other words, 97 per cent of contributors

of pension system were forced to connect to the AFPs.

Workers were required to contribute at least 10 per cent of their wages to an

individual account and employers’ contribution was eliminated. The ultimate balance

consisted of accumulated contributions plus respective investment return. The

members of the AFP program could make a choice between different AFPs. Besides,

they could choose regular withdrawals, an annuity or combination of both at

220

Kurtz, April 2002, p. 296. 221

Huber 1996, p. 166; Mesa-Lago and Muller, August 2002, p. 691. 222

Iglesias-Palau, 2009, p. 22. 223

Iglesias-Palau, 2009, p. 65.

75

retirement. At least 20 years of contribution to an individual retirement account was

necessary to guarantee a minimum annuity benefit from the government. The

minimum retirement age was determined as 60 for women and 65 for men. Until

2000, each AFP was required to offer only one investment portfolio to its members.

The private system established a close link between contributions and retirement

benefits.

The pension transformation aimed to reduce state’s social duties and social

functions. Therefore, this process attained subsidiary role to the state. The state was

obliged to supervise the new system composed of AFPs. The Superintendency of

AFPs (SAFP) was a governmental agency and financed out of the public budget.

SAFP had given the authority to issue secondary regulations in order to provide a

healthy-working system. The state continued to manage the public pension program

for not only armed forces/police but also for insured people who did not want to

switch their pension system.224

Moreover, the recognition bond gave explicit treasury

guarantee.

The basic contradiction of the neoliberal pension program was that the reform

process also gave the state a life-saving role. In other words, the state was obliged to

correct the failures of the system. Hence, one of the most important mottos of

neoliberalism “small but strong state” was established as such during the pension

privatization in Chile. For instance, in case of insolvency of an AFP, the state had

guarantee for the payment of disability and survivorship insurance, and the payment

of funeral expenses grant. The approach of the reform was to turn the management of

the program over to private entities while keeping the responsibility over its most

critical results in the hands of the state.225

Moreover, the opposition of social forces

to pension privatization was prevented by the authoritarian measures of the state such

that trade unions were banned and political rights were suspended.

224

Iglesias-Palau, 2009, pp. 20-21. 225

Iglesias-Palau, 2009, p. 20.

76

3.2.2.2 Expected Results? Real Outcomes

The reform process promised a) to increase the coverage of the pension

system, b) to increase the pension value of people due to the competition in the

private market, c) to provide freedom of choice d) to reduce state’s role and fiscal

costs, e) to contribute financial market development and to boost domestic saving

rate, and f) to isolate pension decisions from politics.

In the first place, as the numbers demonstrate that only 62 per cent of labour

force in Chile would ultimately be covered by the private pension system by 1997, a

proportion which was approximately the same in the former system226

, the creation

of private pension accounts did not succeeded in providing incentive to workers to

participate. Proponents of the reform admitted some of the weaknesses of the new

system such as coverage rate. However, they explained the coverage problem with

the involvement of state. In other words, minimum pension guarantee that was

provided by the state created a moral hazard among low-paid workers since they only

paid for getting minimum pension.227

According to Packard’s analysis, this argument

was valid to a certain extent that, most of the Chilean workers, who met the basic

requirements of minimum pension guarantee, ceased to contribute the private

pension system. Instead, they preferred less risky ways of investment such as

housing.228

To put it differently, people did not believe in the profitability of private

pension accounts which were invested in financial markets.

The coverage problem was directly related to the employment structure in the

labour market. It was argued before the reform process that high contribution rates

226

Sebastian Edwards and Alejandra Cox Edwards, “Economic Reforms and Labour Markets: Policy Issues and Lessons from Chile”, National Bureau of Economic Research Working Papers (Working Paper No. 7646, 2000), p. 21; Silvia Borzutzky, “Reforming the Reform: Attempting Social Solidarity and Equity in Chile’s Privatized Social Security System”, Journal of Policy Practice (Vol. 11, 2012), p. 80. 227

Sebastian Edwards and Alejandra Cox Edwards, “Social Security Privatization Reform and Labour Market: The Case of Chile”, National Bureau of Economic Research Working Papers (Working Paper No. 8924, 2002), p. 469. 228

Truman G. Packard, “Pooling, Savings and Prevention: Mitigating the Risk of Old Age Poverty in Chile”, World Bank Policy Research Working Papers (Working Paper No. 2849, May 2002). As of 2007, 37 per cent of members, who qualified retirement, stopped contributing to the private pension accounts. (Iglesias-Palau, 2009, p. 39.)

77

discouraged employers from hiring additional workers and directed them to informal

employment. For this reason, the employers’ contribution was eliminated to reduce

informal employment. However, labour market transformation was inevitable part of

market oriented structural adjustment programs. Therefore, Chile’s labour legislation

was changed in 1979 in order to reduce the payroll tax, to reduce unions’ power and

to limit the extent of severance payment.229

As a consequence, the changes in the

employment structure yielded to labour market flexibility which also reduced the

coverage of pension system and the average wage of workers. Under these

conditions, it was almost impossible for a low-paid part-time worker to contribute to

the individual pension account.

In the second place, the value of pension for men increased just for high-paid

full-time workers. But, the private pension system deteriorated the value of women’s

pensions. The contribution of women has always been limited in comparison to

men’s due to the traditional roles of women such as child bearing-rearing and other

family responsibilities and the condition in Chile was not an exception. There, it was

not easy for women to contribute to private pension accounts adequately.

In 1999, annual return on pension funds was 11.3 per cent; however,

administrative costs (2.61 per cent) should be deducted to reach net return. The

average yield prior to 1995 was higher such that during the period of 1981-1994,

Chilean pension funds realized 13.8 per cent return. The average annual return on

pension funds was 2.6 per cent between the years of 1995 and 1999 inheriting

negative results in 1995 (-2.5 per cent) due to the crisis in Mexico and in 1998 (-1.1

per cent) due to the crisis in East Asia. Therefore, the value of pension is strictly

dependent on fluctuations in the capital market. The periods of boom and bust

generated quite different pensions. The people who joined the system in the 1980s

ensured higher pensions than ones who joined later in Chile.230

It was argued that the private accounts would create a competitive AFP

market which would increase the value of pensions, reduce administrative costs and

229

Edwards and Edwards, 2002, p. 470. 230

Carmelo Mesa-Lago, “Models of Development, Social Policy and Reform in Latin America”, in Thandika Mkandawire (ed.), Social Policy in a Development Context (New York: Palgrave Macmillan, 2004), pp. 196-200.

78

improve the allocation of capital. In reality, the number of AFPs continued to

increase until 1994 reaching to 21; then started to decrease even less than 10 in the

2000s due to market concentration. Instead of being competitive, the AFP market

became an oligopoly market owing to the mergers and acquisitions. For instance, 78

per cent of affiliates in the private system belonged to only three biggest AFPs in

1999.231

Furthermore, the volume of private pension funds increased from 10 per

cent of GDP in 1985 to 45 per cent of GDP in 1997232

, so, half of the present GDP

was transferred from workers pocket to large conglomerates.233

According to the

calculations of Solimano, the AFPs sector ranked first with the pharmacies sector due

to its concentration level. They were followed by health insurance sector.234

The competition in the market did not ensure lower administrative costs,

which were paid by the members of AFPs. It was estimated that, administration fees

retained one-quarter of the net mandatory contributions of the average Chilean

contributor who retired in 2000.235

In fact, stiff competition contributed to the

increase of costs due to the advertising. However, people were required to pay high

level of management fees as they did not have any other option to get pension right.

In the third place, the ideological support for the reform was set by its

claimed capacity to provide freedom of choice. New entrants did not however have a

choice between public and private pension system. Only registered workers at the

time of reform enjoyed this right. The members of the private pension system were

given the right to choose between pension administrators and the pension mode at

retirement. But the profile of the member portfolio was decided by the AFPs. The

insured could not withdraw the sum in his/her individual account at the time of

231

Carmelo Mesa-Lago, “Myth and Reality of Pension Reform: The Latin American Evidence”, World Development (Vol. 30, No. 8, 2002), p. 1311. 232

Edwards and Edwards, 2002, p. 468. 233

Manuel Riesco, “Is Pinochet Dead?”, New Left Review (Issue 47, September-October 2007), p. 10; Borzutzky, 2012, p. 82. 234

Solimano, 2012, pp. 125-127. 235

Gill, Packard and Yermo, 2005, p. 148.

79

retirement, but was obliged to choose between the options of getting an annuity, a

programmed pension or a combination of both.236

In the fourth place, the state was promoted as inefficient to manage the

accumulated pension funds so that the system was privatized and pension funds were

committed to private pension companies which would operate arguably more

efficiently and profitable. In return, the state was authorized to supervise and to

regulate the AFPs, and to correct the failures of the AFPs. So, how could an

inefficient state be expected to achieve these duties? Or if the state could supervise

the private pension system, why could it not act as a pension provider? Hence,

instead of downsizing the role of state, the state’s role was indeed increased in both

expenditure and management sides.

In addition, the fiscal costs of the state did not diminish but increased because

of transition costs. The size of transition costs were determined mainly by the

generosity of the retirement conditions of public system, the responsibilities of the

state during the transition, the percentage of covered population and demographic

characteristics of the population.237

The state lost pension revenue, with no

corresponding drop in pension expenditures especially in the medium term since it

continued to pay pensions of existing retirees and to compensate the recognition

bonds of people who switched to the AFP program.238

The state was also made

responsible for the payments of minimum guaranteed benefits and social assistance

pensions, and likely deficits of armed forces/police public pensions. During the

legislation work of pension reform in 1980, José Pinera claimed that “the cost of the

reform to the public treasury is zero”.239

Nonetheless, fiscal costs, which were

resulted from financing of public pension deficit and recognition bonds, increased

from 3.8 per cent to 6.1 per cent of GDP during the period of 1981-2000.240

The

236

Mesa-Lago, 2004, p. 185. 237

Mesa-Lago and Muller, August 2002, p. 711. 238

Madrid, Summer 2005, p. 28. 239

John Lear and Joseph Collins, “Retiring on the Free Market: Chile’s Privatized Social Security”, NACLA Report on the Americas (Vol XXXV, No 4 January/February, 2002), p. 40. 240

Mesa-Lago, 2002, p. 1318.

80

liberals proposed that the public finance deficit could be easily solved with transfer

of funds from the privatization revenues of state-owned enterprises.241

In the fifth place, an econometric study, prepared by Robert Holzmann,

commissioned and published by the IMF, demonstrated that the pension privatization

contributed to financial market development in Chile in terms of market deepening,

liquidity and competitiveness.242

Nevertheless, he also warned that development of

financial market could not be explained by only private pension system. “It may

simply reflect changes in legislation and the lessons learned from the experiences

and mistakes of the late 1970s and early 1980s”.243

The contribution of the pension

reform to national saving was negative since, in line with his calculations, direct

effect of financial market development on the private saving rate was negative until

1989; it was estimated to be positive in later years but only in small amounts.244

According to Valdes-Prieto, “moving the pension plan from PAYGO to prefunding

offered a unique opportunity to raise national saving245

” since hidden fiscal costs of

the private pension system had a negative effect on return on pension funds.

In the last place, private pension accounts were assumed to protect the system

from political interference, but the privatization of pension system could not

automatically eliminate the political risk. The case of Argentina proved this

explicitly since the government seized the accumulated funds in the private pension

system twice during the 2001 and 2008 crises.246

Moreover, the private pension

system itself required state intervention and effective government in terms of

legislation-making and supervision of the proper function of the private system.

241

Kritzer, 1996, p. 46; Iglesias-Palau, 2009, p. 27. 242

Robert Holzmann, “Pension Reform, Finanical Market Development, and Economic Growth: Preliminary Evidence from Chile”, IMF Staff Papers (Vol. 44, No. 2, June 1997). 243

Holzmann, June 1997, p. 163. 244

Holzmann, June 1997, p. 175. 245

Salvador Valdés-Prieto, “Comments” in Holzmann et. al., “Comments on Rethinking Pension Reform Ten Myths about Social Security Systems by Peter Orszag and Joseph Stiglitz”, in Robert Holzmann and Joseph E. Stiglitz (eds.), New Ideas About Social Security: Toward Sustainable Pension Systems in the 21st Century (Washington D.C.: World Bank, 2001), pp. 80-81. 246

Stephen J. Kay, “Political Risk and Pension Privatization: The Case of Argentina (1994-2008)”, International Social Security Review (Vol. 62, No. 3, 2009).

81

Ultimately, the pension transformation served to the interests of the private

sector companies connected to the regime and facilitated the accumulation of capital

in their hands.247

Between the years of 1978-1983, a group of politicians in the

government including José Pinera was claimed to have close ties to the largest

economic groups in Chile. Not surprisingly, one of these groups this group became

the owner of one of the largest private pension company, Provida. As the reform

process was initiated by a discourse of economic and political freedoms, it confirmed

again that these freedoms belonged to a small elite. Capital market players, pension

fund administrators, high-paid workers, full-time workers and generally men had

benefited from pension privatization.248

It is important to note that most of the private pension accounts of the Chilean

people were controlled by the United States investment funds or banks. For instance,

42 per cent of the largest AFP, Provida, was owned by Bankers Trust, and 51 per

cent of the second largest one, Santa Maria, was owned by Aetna Life and

Casualty.249

Furthermore, by 1996, nine of thirteen AFPs in Chile were tied to US

and Spanish based insurance companies that had banking interests.250

In this respect,

the establishment of private pension system served to the accumulation and

centralization of funds in big companies by the help of the contributions of workers

and middle-class. The pension privatization in Chile increased the power of ruling

classes as well as benefited their counterparts in the world.

247

Borzutzky, 2005, pp. 656, 661, 671. 248

Borzutzky, 2012, p. 78. 249

Richard Minns, “The Social Ownership of Capital”, New Left Review (Vol. 219, Sept-Oct 1996), p. 52. 250

Hugo Fazio and Manuel Riesco, “The Chilean Pension Fund Associations”, New Left Review (Issue 223, May-June 1997), p. 96.

82

3.3. Reform of Pension Reform during Centre-Left Coalition Era

After sixteen years of authoritarian regime, centre-left coalition, named

Concertacion251

, took the power in national elections of 1989 (President Patricio

Aylwin ) and continued with the elections of 1994 (President Eduardo Frei), 1999

(President Ricardo Lagos) and 2005 (President Michelle Bachelet) until the election

of conservative candidate Sebastian Pinera, the son of José Pinera, in 2009. Twenty

years of centre-left coalition witnessed new economic and social reforms. Those

reforms should be assessed in the framework of Washington Consensus principles

and the institutionalization of social security reform/pension reform by international

organizations, especially by the World Bank. In fact, according to Riesco, “Pinochet

pioneered the Washington Consensus decades before it became consensual”.252

The new round of social security privatization in Chile attracted widespread

political support from the World Bank and the IMF, the dedicated followers of

neoliberalism. Originally, the radical pension privatization experience of Chile

affected the World Bank most, reflected in the publishing of the report of Averting

the Old Age Crisis, which became the main roadmap of pension reform in the world.

The IFIs supported the privatization of social models through financial and technical

assistance while Chilean technocrats had traveled the globe to tell about the benefits

of privatization.253

When the World Bank published a very comprehensive report on

population ageing and the sustainability of pension systems, it in return had a

substantial impact on the pension system arrangements in Chile. Put it differently,

Chilean model had been a starting point of the World Bank report, but the Bank later

institutionalized the pension system reform, which would improve the reform agenda

in Chile.

In the meantime, the changing attitudes inside the World Bank and the

involvement of the ILO in the pension reform discussions have made an effect on the

economic and social reforms of the centre-left coalition governments in Chile.

251

Concert of Parties for Democracy, founded in 1988, was a coalition of centre and left-wing political parties in Chile. 252

Riesco, September-October 2007, p. 20. 253

Kay, July 1999, p. 405.

83

Transition to democracy and the explicitly negative economic and social outcomes of

the pension privatization have led centre-left coalition governments to attempt to

improve social security rights of the Chilean people. However, those attempts were

limited due to the impact of repetitious financial crises in different regions of the

world and neoliberal policies themselves. In other words, turning back to traditional

universal pension schemes has been a dream and all governments have just tried to

lessen the negative consequences of private pension system. Democratic Chile has to

hence reaffirm the role of the market in the pension structure.

3.3.1 Alywin/Frei/Lagos Governments

Successive governments after the authoritarian rule in Chile attempted to

ensure political and social reforms, while all took pension reform into their agenda.

In the first place, Aylwin (1989-1994) strived with necessary conditions in order to

enable a successful return to democracy. In the second place, Frei (1994-1999) gave

importance to education and infrastructure reforms, and then Lagos (1999-2005)

reformed the private health insurance system. Bachelet (2005-2009) especially

insisted on pension reform during the election campaigns of 2005, and has started

overhauling the pension system after being elected.254

Both parties of centre-left coalition, Christian democrats and socialists

avoided expansionary economic policies in terms of increasing social benefits since

they have broad control over their followers. The attempts to form a coalition against

Pinochet regime for a long time narrowed partisan interests and directed people to

focus on systemic goals.255

However, the basic difference of Pinochet era and

centre-left coalition era was the use of fiscal policies. For instance, the former had

lowered tax burden to weaken the state, the latter used taxation policy a lot. In order

to alleviate the social problems to a certain extent, tax burden of business sectors and

254

Rafael Rofman, Eduardo Fajnzylber and German Herrera, “Reforming the Pension Reforms: The Recent Initiatives and Actions on Pensions in Argentina and Chile”, World Bank Social Protection Discussion Paper (No. 0831, 2008), p. 32. 255

Kurt Weyland, “Economic Policy in Chile’s New Democracy”, Journal of InterAmerican Studies and World Affairs (Vol. 41, No. 3, 1999), pp. 70-71.

84

upper-middle class was increased by 2 per cent of GDP in 1990 by Alywin

administration. By this way, a slight redistribution effect was created.256

President Alywin encouraged the formation of workers’ AFPs. Teachers’

union, banking workers and copper workers took part in the AFPs market.257

It was

an effort to led workers to embrace neoliberalism. On the other hand, the crisis

environment in Latin America during the 1990s (Mexico and Brazil) led democratic

regime to maintain export development model which was initiated by authoritarian

regime in the 1970s. As a matter of fact, Aylwin government continued trade

liberalization by lowering import tariffs in 1991.

On the other hand, Alywin government ratified the ILO Convention No.144

Tripartite Consultation (International Labour Standards/1976) on 29 July 1992258

which necessitated the establishment of tripartite machinery, formed by

representatives of government, employers and employees, to promote the

implementation of international labour standards.

In 1992, the Head of the ILO Social Security Department, Colin Gillion and

his colleague made an assessment of the Chilean pension system with the claim that

the reform brought no inter-generational transfer within the society, no mutual

insurance between the members and no solidarity between social groups. Moreover,

all benefits could be obtained by individual efforts in a fragile financial market. The

benefit of private pension accounts appeared to be marginal in terms of their ability

to provide adequate level income maintenance during the retirement period. The

risks in the financial market were borne only by the individuals and there was no

safety net. Lastly, the cost of transition and public pension system requirements of

the state amounted to approximately half of the social security budget in 1988.259

As

the private pension system breached the most important common articles of ILO

256

Weyland, 1999, p. 73. 257

Fazio and Riesco, May-June 1997, pp. 97-98. 258

Available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102588,. 259

Gillion and Bonilla, 1992, pp. 185, 190, 192.

85

conventions that had been ratified in 1935 and still in force, the new system was not

compatible with the ILO’s approach to the social security.

The Thirteenth Conference of American States Members, held in Caracas in

1992, emphasized that the ensuring the social security of all people was still the

obligation of the state. However, the conference did not reach a firm agreement on

the position of private sector in the organization of social security.260

Gillion and Bonilla recommended an alternative model of three-tier pension

system that should be supervised by the state. The model comprises a) a basic

minimum guaranteed pension (safety net), b) a defined-benefit, earnings-related

pension scheme with the contributions of both employer and employee and working

on global and partial funded system, and c) an optional complementary scheme.

They also mentioned that an additional tier should be supplemented in terms of

providing minimum income to non-contributors especially in informal sector.261

Two years later, in 1994, the World Bank announced a three-pillar pension

model with its famous report of Averting the Old Age Crisis. The Bank exalted the

Chilean way of pension reform but suggested a pension system which also envisaged

a small public pillar. Its model was based on three-pillars of a publicly managed

pillar with mandatory participation, privately managed pillar with mandatory

participation, and a privately managed voluntary saving pillar.262

The Lead

Economist of the World Bank claimed that the public pillar missed an opportunity

for capital market; a defined-contribution, funded and privately-managed saving

pillar was the best way to allocate capital, to create highest return on savings and to

spur financial market development.263

The recommendations of the ILO’s executives were not much effective on the

governments in Chile than the World Bank. Instead of pension system corrections,

260

ILO, “Records of the Thirteenth Conference of American States Members of the ILO”, Caracas, 30 September- 7 October 1992, Available at: http://white.oit.org.pe/oitamericas99/english/anteced/confre92/reconf.shtml. 261

Gillion and Bonilla, 1992, p. 194. 262

World Bank, 1994. 263

Estelle James, “Protecting the Old and Promoting Growth: A Defense of Averting the Old Age Crisis”, World Bank Policy Research Working Papers (Working Paper No. 1570, January 1996), p. 4.

86

Frei’s government also continued with the neoliberal agenda of trade liberalization.

The import tariffs were further decreased in 1998 in order to cope with international

competition that intensified owing to East Asian crisis. This also forced an increase

in consumption taxes to cover the fiscal costs.264

Due to persistent social inequality, taxation policy received attention in 1997

and 1998 again. However, at this time, fiscal policy efforts of centre-left coalition

were bounded by the likely effects of the East Asian crisis. In other words, the Frei’s

government could not risk the investor confidence by making tax raise265

since

financial crisis led the governments to pursue liberalization programs by creating

fears of investment withdrawal. This notion strengthened one of the best known

mottos of neoliberalism in Chile that “there is no alternative to neoliberal

policies”.266

President Frei did not make an important change within the pension system

but he took some significant steps in ratifying four fundamental ILO conventions.

Convention No.87 Freedom of Association and Protection of the Right to Organize

(1948), Convention No.98 Right to Organize and Collective Bargaining (1948),

Covention No.105 Abolition of Forced Labour (1957) and Convention No.138

Minimum Age (1973) were ratified on 1 February 1999.267

By this way, workers

would have the right to establish and join organizations, and enjoy adequate

protection against acts of anti-union discrimination in respect of their employment.

The government undertook the responsibility to not to make use of any form of

forced and compulsory labour. Moreover, minimum age for employment was

determined in order to ensure the effective abolition of child labour.

The government also ratified some technical conventions of the ILO to

establish a system of minimum wages and to improve the working conditions. The

264

Weyland, 1999, p. 77. 265

Weyland, 1999, p. 74. 266

Jean Grugel, Pia Riggirozzi and Ben Thirkell-White,”Beyond the Washington Consensus? Asia and Latin America in Search of More Autonomous Development”, International Affairs (Vol. 84, No. 3, 2008), p. 502. 267

Available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102588.

87

Convention No.131 Minimum Wage Fixing (1970) and Convention No.135

Workers’ Representatives (1971) were ratified on 13 September 1999. Convention

No.161 Occupational Health Services (1985) was ratified on 30 September 1999.268

During the Lagos administration, private sector’s role in the pension system

was enhanced by the introduction of supplementary plans and an unemployment

insurance program, and by the establishment of multi-funds. Law No 19768 gave

way to increased scope of voluntary contributions in order to develop capital markets

by stimulating private savings. The contributions were non-taxable and people were

allowed to deposit to the other private organizations such banks, mutual funds and

life insurance companies.

In terms of working conditions, President Lagos empowered public workers’

rights by ratifying the ILO Convention No.151 Labour Relations (Public

Service/1978) on 17 July 2000.269

Unemployment Insurance Program began to operate in 2002 under the

management of a private company, Unemployment Insurance Administrator

Corporation and it was expected to accumulate USD 3 billion dollars in ten years.

Moreover, additional types of funds are created which were “more risky but more

promising”. The only good news was that, the people aged 55 and over were

excluded from this provision.270

Originally each AFP offered only one portfolio. The

number of portfolio was increased to two in 2000 and then, increased to five in

2002271

, which meant an increase in the volume of transactions in the financial

market. The 2002 legislation allowed free switch between different funds but limited

this to twice in a year.

An anti-poverty program, named Chile Solidario, was also launched during

the Lagos administration and strongly aimed at very poor households amounted USD

268

Available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102588. 269

Available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102588. 270

Borzutzky, 2012, pp. 108 -109. 271

Iglesias-Palau, 2009, p. 18.

88

100 per month per participating family. The program improved the conditions of

existing social benefits for low-income families.272

The introduction of anti-poverty program was also emanated from rising

international discussions on poverty. For instance, the internal debates in the World

Bank, which were also affected by the observation of country experiences over time,

have led to change in its policy preferences. The Bank’s market oriented approach

bounded by the Washington Consensus principles have radically shifted by the

World Bank report titled Attacking Poverty.273

In this report, the Bank questioned the

growth versus equity approach of market-oriented policies though the Bank’s

recognition of the negative impact of market policies on societies in general and on

poverty in particular have not led to an advocacy of greater state involvement.

Instead it has prioritized the involvement of national and international NGOs in

creating equitable growth.274

In Chile, the focus on poverty was to be institutionalized under the New

Solidarity Pillar (NSP) of the Bachelet’s government.

3.3.2 Bachelet Government

2005 presidential election was done in the shadow of social questions raised

by the pension privatization since its impact appeared explicitly by that year.

Therefore, the socialist candidate Bachelet concentrated on those questions during

the election campaign. In order to assess the differences between expected results

and real outcomes of pension reform and to find solutions to current problems

resulted from pension privatization, she established Presidential Advisory

272

Solimano, 2012, pp. 99-100. 273

World Bank, World Development Report 2000/2001: Attacking Poverty (New York: Oxford University Press, 2001). 274

Chris Pierson, “‘Late Industrializers’ and the Development of the Welfare State”, in Thandika Mkandawire (ed.) Social Policy in a Development Context (New York: Palgrave Macmillan, 2004), p. 236.

89

Commission on Pension Reform, which was named by its team leader, Mario

Marcel, Marcel Commission.275

First of all, the Commission listened to the key actors, organized international

conferences, made surveys and prepared an assessment report of the current situation

of the private pension system. The report, which was issued in July 2006,

summarized the following findings:276

- The projections for the distribution of pensioners of cohort 2020-2025

demonstrated that 32 per cent of men and 61 per cent of women would have

pension lower than minimum pension.

- The system served mainly to full-time male workers.

- The competition in the AFP business increased by 1994 but then after it has

had a continuous declining trend. While the number of pension administrators

was more than twenty in 1994, it was only six in 2005.

- The actual coverage did not surpass the value of 55 per cent.

- The gross return on pension funds realized the highest return with

approximately 30 per cent in the early 1990s; however, it concentrated

around 5 per cent in the 2000s.

- The families were unable to fill the gap left by pensions and the social crisis

was at the door.

Then, the Commission made around seventy proposals to overcome the

weaknesses of the current system. The main proposals aimed to introduce a new

solidarity pillar by including the non-wage earners to ensure sustainability and

transparency of pension fund management, to provide the inclusion of self-employed

and to provide gender equity by eliminating discriminatory treatment of women in

the pension system. Furthermore, they aimed to intensify the competition in the AFP

business and introduce a more flexible investment regime for private pension

accounts. The report also gave importance to the creation of committee of

275

Borzutzky, 2012, p. 109. 276

Mario Marcel, “Chile’s 2008 “Reform of the Reform”: A Model for Other Countries?” (2009), Available at: http://csis.org/files/media/csis/events/090324_gai_marcel.pdf.

90

stakeholders of the pension system such that representatives of pensioners, workers,

employers and fund administrators.

Having been approved by the Congress in January 2007, the reform package

was put in effort in July 2007. The majority of the proposals were turned into law

(Law No 20255) in 2008 but the Commission estimated 10 years period for the full

implementation of the reform.277

In response to poverty considerations, a NSP was created to replace the

programs of Minimum Pension Guarantee (MPG) and Means-Tested Assistance

Pension (PASIS). These two programs had been the major poverty prevention

programs of the state after the privatization of the pension system and they were

financed by the general revenue.278

But this time, the coverage of poverty prevention

pillar was extended that New Solidarity Pillar guaranteed a Basic Solidarity Pension

(BSP) to individuals in the lower 60 per cent of the population and with no pension

earnings. It also provided a Pension Solidarity Complement (APS) to the individuals

who had a small pension in order to alleviate poverty in old age.279

As a result, the

first pillar of the World Bank model was institutionalized with the integration of

social assistance programs by the NSP under the management of a public agency, the

Social Security Institute.

The estimations that demonstrated a declining trend of transition costs by the

year 2005280

enabled Bachelet to ensure more place to social safety net for old and

disadvantaged people. Transition costs reflected minimum pension and social

assistance expenditures, payment of recognition bonds and operating deficits.

While the AFP system fully represented the second pillar of the World Bank

model, the third pillar of privately managed voluntary saving pillar was realized by

the introduction of supplementary pensions in 2001 and the establishment of multi-

funds in 2002.

277

Marcel, 2009. 278

Rofman, Fajnzylber and Herrera, 2008, p. 28. 279

Rofman, Fajnzylber and Herrera, 2008, p. 37. 280

Economic Commission for Latin America and the Caribbean, Shaping the Future of Social Protection: Access, Financing and Solidarity, Thirty First Session of ECLAC, Montevideo, Uruguay (Santiago: United Nations, 2006), p. 126.

91

In addition to three pillars of the World Bank, two more programs were still

in the effect in the Chilean pension system; the public pension program, which

covered the people who did not switch to the AFP system at the time of reform, and

the pension program of armed forces/police.

It was significant that 2008 reform strengthened the government support to

private pension accounts such as social security contributions for the first 24 months

of low-income workers were subsidized by 50 per cent and the state either deposited

a bonus in the woman’s account or increased the amount of BSP in the annuity-

equivalent for every live birth or adopted child.281

2008 reform made investment regime much more flexible than before by

determining the higher limit for foreign investment as 80 per cent of the value of

pension fund. The investment regulations, which were previously defined in the text

of law, were transferred to a sort of secondary regulation, named Pension Fund

Investment Regime.282

This application aimed to exclude political accountability.

Although the AFP business was opened to banks in order to increase the

competition in the market and to reduce administrative costs283

, the expected results

did not come true. The members of the private pension system still continued to pay

a significant part of their contribution to administrative costs. But, financial

transactions increased due to the opening of the AFP market. The players in the

financial market also reached new funds.

3.3.3 An Assessment of Centre-Left Coalition Era

At this point, it is necessary to ask that whether there was any philosophical

change concerning the pension policy between the authoritarian regime of Pinochet

era and democratic regime of centre-left coalition era. The current situation of the

pension system indicated that although Pinochet’s dictatorship ended in 1989, his

legacy lingers on in the form of neoliberalism with human face.

281

Rofman, Fajnzylber and Herrera, 2008, p. 34. 282

Iglesias-Palau, 2009, p. 50. 283

Borzutzky, 2012, p. 110.

92

It is hard to expect a radical change in the social, economic and political order

of Chile after Pinochet despite the change in the political rule. Pinochet had changed

all aspects of society in his sixteen years of administration. Most of the state-owned

enterprises had been privatized. This process had created young and aggressive new

Chilean bourgeoisie who assumed leading roles in economic life in the 1990s and

exercised complete control over the banks and private corporations. They also started

controlling a significant part of the parliament through right-wing parties. By this

way, neoliberal ideology had maintained its hegemony over the public policies.284

But Washington Consensus policies embraced the Latin American and

Chilean ruling classes, during the democratic rule as well. As the left-wing parties

were isolated during the long period of authoritarian regime, they continued to

pursue neoliberal policies in exchange for international political inclusion. State

would no longer be engaged in redistribution activities. But they also searched for

alternative ways of development models which would involve a mixture of open

markets and left-wing political and social agenda at the same time.285

In this way, a

solidarity pillar was established and strengthened to provide relief in poverty.

Centre-left coalition presidents followed a more democratic way of reform in

general. For instance, both Alywin’s and Frei’s governments pursued more

inclusionary tripartite policies between government, trade unions and business while

determining social provisions.286

2008 reform law was approved after two years of

debates and comprehensive analyses.287

Even the workers were encouraged to

establish their own pension administrator and enter into the AFPs business. This

could be seen as an attempt to appease their opposition toward the harmful impact of

private pension system. As centre-left coalition governments tried to subordinate

workers to the neoliberal order by offering them AFP business, this validates that

neoliberal pension transformation in Chile has been an explicit ruling class strategy.

284

Riesco, September-October 2007. 285

Grugel, Riggirozzi and Thirkell-White, 2008, pp. 505-509. 286

Weyland, 1999, p. 82. 287

Rofman, Fajnzylber and Herrera, 2008, p. 58.

93

3.4 Conclusion

Neoliberal pension transformation in Chile by the authoritarian hand of

Pinochet’s regime created a private pension system. It was the first example of

pension privatization in the world. Chile used to have a public pension system that

was based on universalism and redistribution before the military coup of 1973.

Neoliberals represented by the Chicago Boys, educated in the United States,

implemented their program and altered all social and economic relations of the

society by using the coercive power of the authoritarian regime.

The privatization of the public pension system was justified by the arguments

such as the existence of discriminatory applications, the low level of coverage and

fiscal sustainability. As the pension system had been the most strictly regulated area

of state-worker-society relations, the underlying target was to weaken the power of

the labour and the left and to enhance authoritarian rule.

In order to provide “freedom of choice” to people by individual private

pension accounts, the current workers were forced to enter the new system

introduced by the pension reform. Moreover, the public pension system was closed

to new entrants. Instead of increasing the fiscal sustainability of the system, or the

value of the pensions, or boosting competition in the private market and national

savings, the new system led to increased number of poor people and better pension

value for only high-paid and full-time workers. The level of coverage was settled

approximately the same. The expected competition was not realized due to the

concentration in the private pension market, an inherent feature of neoliberal market

policies. Furthermore, the state continued to pursue a significant role in order to

subsidize the fiscal deficit of the system and correct market failures.

The pension privatization process in Chile achieved the fundamental

neoliberal aim of opening one of the protected areas, the pension funds of labour, to

the accumulation of capital. As a result, the pension fund administrators, capital

market players and their affiliates at the international level have been the ones to

benefit from the new private system in the final analysis.

The potential of pension funds to ensure further capital accumulation

attracted the political support of the IFIs, so that the transformation of pension

94

systems became one of the most credible tools of imposed structural adjustment

programs thereafter. However, as discussed in the previous chapter, raising poverty

and inequality have forced a reconsideration of the content of the neoliberal pension

reform internationally so that all relevant international organizations have started

recommending multipillar pension systems that involve public and private

components at the same time. In Chile however, there has been no way to turn back

to public pension system since all aspects of life were radically made upside down by

the neoliberal policies imposed under the military regime. Thus after Pinochet, even

centre-left coalition governments have ended up maintaining the private pension

system by supplementing it with the solidarity pillar in order to alleviate poverty.

95

CHAPTER 4

TURKISH PENSION TRANSFORMATION AND

THE EVOLUTION OF THE INDIVIDUAL PENSION SYSTEM

4.1 Introduction

The neoliberal transformation of the Turkish social security system including

pensions, which started in the late 1970s, is an integral part of Turkey’s integration to

the neoliberal world. As Turkish politics is not independent from developments in

the world, the reform process in the social security system should be analyzed in the

light of the decline of welfare state in the world. The international organizations have

been very effective in Turkish social security reform as they have been in other

countries of the South.

The main neoliberal argument of the early 1980s was that structural

adjustment programs would increase employment levels and reduce poverty in the

South. However, the main requirement was defined as no labour market distortions

such as minimum wage legislations and unionization. It was claimed that these

arrangements would result in high unemployment rates and unequal income

distribution. The neoliberals prepared the necessary ground to emphasize the labour

market flexibility by using these arguments.

For Topak, there was no Keynesian welfare state in Turkey even before the

1980s since the basic requirements of it had not been achieved such as the

industrialization of society and division of labour. Moreover, the family had

continued to have the biggest role in providing welfare.288 The shift from import-

substituting industrialization model (ISI) to export-led strategies in relation to

neoliberal economic policies remained mostly as a discursive justification. In reality,

288

Oğuz Topak, “Neo-Liberalizm ve Refah Devleti Miti”, in Mustafa Kemal Coşkun (ed.), Yapı, Pratik, Özne- Kapitalizmin Dönüşüm Süreçlerinin Ekonomi Politik Eleştirisi (Ankara: Dipnot Yayınları, 2009), pp. 121-122.

96

the policy makers followed economic and social policies to attack labour. By this

way, social policies have been reorganized through privatization, localization,

commodification strategies and flexible employment legislation.289 The economic

transformation in the 1980s and 1990s was parallel to the “big project of

neoliberalism that was to liquidate social essence of the regimes and establish a

welfarism based on individualism”.290

The liberalization of capital movements, privatization and openness to trade

and FDI in the 1980s were the results of the first generation reforms related to

Washington Consensus policies. The flexible labour market provisions, social

security transformation and targeted poverty policies to manage social risks could be

considered, on the other hand, as the outcomes of the post-Washington Consensus

policies in Turkey since the 1990s.

Even though the Turkish pension system underwent an inclusive reform

process in 1999 and 2006, the IFIs (World Bank and IMF), the ILO and the EU had

been pressing the reform for a long time. Unsurprisingly, the common argument of

these organizations was the diminishing of public pension schemes and supporting of

private second and third pension pillars. The representatives of capital groups such as

TÜSİAD (Turkish Industry and Business Association) also advised pension reform

and the introduction of private pension pillar due to its likely impact on financial

deepening. It is significant that, the reform process has accelerated with the rise of

the Justice and Development Party (JDP) to power in 2002.

In order to justify the pension reform in Turkey, a long propaganda was

conducted with the arguments that there was corruption in the pension system, the

new system would serve more efficient and better quality, and all people would be

brought under the umbrella of social security. However, this propaganda, which has

aimed to create a positive understanding of the market as an alternative to public

social security, has essentially attempted to open this sector to private companies.291

289

Topak, 2009, p. 124. 290

Sinan Sönmez, “From Semi-Peripheral Welfarism to Neo-Liberal Solutions: What About New

Perspectives? Developing World and Turkey”, Presentation for RC 19 Conference on Social Policy in a Globalizing World, Firenze (September 2007), p. 25. 291

Murat Özveri, “Yoksulluğun Yönetilmesi ve Sosyal Güvenlik Hakkı”, Praksis, (No. 9, Kış-Bahar 2003).

97

This chapter aims to understand the Turkish pension transformation by

concentrating on the neoliberal turn in the 1980s and the politics of reform. As

examined in the previous chapters, neoliberal economic policies and financial crises

as their natural outcome have created unemployment and poverty in the countries of

the South. This has resulted in revisions in neoliberal pension discourses with

poverty reduction and social risk management becoming the main reference points.

The Turkish example has had a different character even though this rhetoric has also

been utilized. For the charity-based redistribution replaced formal social policies due

to the Islamized neoliberal order, which had gained popularity in the beginning of the

1990s but reached its peak with the appointment of the JDP in 2002. This strategy

has also prevented the reactions towards neoliberal policies to acquire a destructive

character.

The first section of the chapter will identify the basic characteristics of the

Turkish pension system before the neoliberal turn. The main questions problematised

will be how pension rights of different employment groups were organized and how

pension funds were used before resulting in the claimed deficits. Then, the dynamics

of neoliberal turn in Turkish economy including labour market arrangements and

raising arguments concerning pension system will be discussed. Furthermore, the

involvement of international actors will be assessed by looking into their

conditionality provisions. Among Turkish capital groups, especially TÜSİAD’s

opinions will be detailed as it systematically involved pension transformation. The

goals, the expected results, and the actual results of 1999 and 2006-2008 legislative

changes will also be analyzed in this section. Lastly, Islamic solutions for the losers

of neoliberal pension policies will be assessed.

The second section will concentrate on the evolution of the Individual

Pension System (IPS) in Turkey. Firstly, its historical background, main

determinants and operational structure will be given. The main questions asked will

be whether there was any attempt to change the structure of the System during 2008

global financial crisis and how the incentive mechanism has developed through

changing circumstances. Secondly, the System will be evaluated according to the

figures of ten years of its operation.

98

4.2 Pension Transformation in Turkey

This section first summarizes the pension system of Turkey before 1980.

Then, the impact of neoliberal turn, which was realized by the military coup of 12

September 1980, on social security provisions in general and on pensions and labour

market in particular will be assessed. Two rounds of pension reform in 1999 and

2006-2008 are also problematized in detail.

4.2.1 The Pension System before 1980

The social insurance during the Ottoman period was sheltered by family and

solidarity among the craftsmen. Moreover, there were some chests for old-age and

sickness insurance for soldiers and civil servants. As the mining sector had the most

dangerous working conditions and unfortunate accidents, their employees were

covered against sickness and work injury by Law No. 151 in 1921 during the

Independence War. Furthermore, dependents of employees were supported by

survivors’ benefit.292 This Law also resulted in the establishment of Amele Birliği in

1923.

The first Labour Law293

of Turkey was legislated in 1936 and made primitive

arrangements for minimum payments, working hours, social insurance and severance

payments.294 The Article 100 of such law envisaged social aid in the cases of

employment injury and occupational diseases, maternity, old-age, invalidity, sickness

and death. The institutionalization of social security in Turkey started after the World

War II under the impact of Keynesian welfare state applications in the Western

World. The financial aids, which were provided by the Marshall Plan and the IMF,

created economic development that also affected social security area.295 Insurance for

employment injury, occupational diseases and maternity were initiated in 1945. Old-

292

Cahit Talas, Türkiye’nin Açıklamalı Sosyal Politika Tarihi, (Ankara: Bilgi Yayınevi, 1992), pp. 183-185. 293

Labour Law No. 3008, Official Gazette (No. 3330, 15.06.1936). 294

Talas, 1992, p. 105. 295

Songül Sallan Gül, Sosyal Devlet Bitti, Yaşasın Piyasa! (Ankara: Ebabil Yayıncılık, 2006), p. 260.

99

age insurance was organized in 1949 and extended to disability and survivors’

benefit in 1957.296 Public Employees Pension Fund (PEPF) (Emekli Sandığı) was

established in 1949 by the Law No. 5434297 and brought many chests of different

public works together. Article 13 of this law indicated the benefits covered as

retirement benefit, retirement bonus, lump-sum payment, invalidity benefit,

survivors’ benefit, war-disability benefit and repayment of contributions. The

contributions of public enterprises and insured people have comprised the revenues

of the Fund.298

Social Insurance Institution (SII) (Sosyal Sigortalar Kurumu) was established

in 1945299 in order to regulate insurance provisions for employees that do not work in

the public sector. In fact, it has provided coverage for workers in both public and

private sectors. It rested on the Labour Law of 1936. The SII provided retirement,

maternity and survivors’ benefit and covered against employment injury,

occupational diseases, sickness and invalidity. The SII started to provide insurance

facilities to agricultural workers by the enactment of the Law No. 2925.300

The

Institution has been financed by the contributions of employees and employers.301

The state contribution was introduced in 1999 for only unemployment insurance

premiums, then in 2006 for old-age and general health insurance premiums.

Social Security Organization of Craftsmen, Tradesmen and Other Self-

Employed (Bağ-Kur) was established in 1971302 in order to provide social insurance

coverage for self-employed. The only source of finance of the organization has been

296

Talas, 1992, p. 126. 297

Law on Turkish Republic Retired Fund No. 5434, Official Gazette (No. 7235, 17.06.1949). 298

Talas, 1992, p. 187-189. 299

Law on Employee Insurance Institution No. 4792, Official Gazette (No. 6058, 16.07.1945). 300

Law on Social Security for Agricultural Workers No. 2925, Official Gazette (No. 18197,

20.10.1983).

301

Talas, 1992, pp. 191-192, 197. 302

Law on Social Insurance Institution for Craftsmen, Tradesmen and Other Self-Employed No. 1479, Official Gazette (No. 13956, 14.09.1971).

100

the contributions of insured people.303 The insurance coverage in Bağ-Kur is very

limited as it includes only old-age, invalidity and survivors’ benefits. The sickness

benefit was started to be covered in 1985.304

The social security rights of the self-

employed in agriculture were incorporated to the Bağ-Kur by the Law No. 2926.305

Two mandatory occupational pension funds such as the Amele Birliği, which

was established in 1923, and the Armed Forces Pension Fund (OYAK), which was

established by Law No.205306 in 1961, has been operated as a complementary

pension pillar.

1961 Constitution introduced the principle of social state that everyone has

the right to social security. The transfer of resources was regulated through Law

No.441307 between State Investment Bank (SIB) and social security institutions in

1964 within the framework of the planned economic understanding, dominant in the

1960s and 1970s. After 1964, social security funds were invested in bonds,

particularly the SIB bonds, rather than bank deposits. During the period of 1963-

1977, roughly 60 per cent of the resources of the SII and PEPF were invested to

bonds.308 By this way, the resources of social security institutions were used by SIB

to support state-owned enterprises. In other words, employees supported the

development of capital market and financed industry while saving for their future.

Turkey ratified the ILO Convention No.102 Social Security (Minimum

Standards/1952) in 1975.309 The ILO Convention No.122 Employment Policy

303

Talas, 1992, pp. 200-202. 304

Yenimahalleli Yaşar, 2012. 305

Law on Social Security for Self-Employed in Agriculture No. 2926, Official Gazette (No. 18197, 20.10.1983). 306

Law on Turkish Armed Forces Assistance Fund No. 205, Official Gazette (No. 10702, 09.01.1961). 307

Law on State Investment Bank No. 441, Official Gazette (No. 11662, 21.03.1964). 308

State Planning Organization (SPO), Third Development Report (1973-1977) (Ankara: SPO), pp. 802-803; SPO, Fourth Development Report (1979-1983) (Ankara: SPO), pp. 141-142. 309

Available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:10289.

101

(1964)310, which envisaged that the member country should take necessary measures

to achieve full employment, to raise standards of living including adequate wages

and to prevent unemployment, was ratified in 1977.311

The unemployment insurance was planned to be introduced in the First

Development Plan (1963-1967)312, and this intention was preserved in the following

plans. Moreover, the Second (1968-1972)313 and Third (1973-1977)314 Development

Plans intended to converge social security institutions and introduce state

contribution. All these goals were realized ultimately in the 1999 and 2006-2008

reforms. Before 1980, men and women were able to get retired at the age of 55 and

50 respectively. While the minimum contribution period was 5,000 days, “25 years”

was set as the contribution period.315

4.2.2 Pension Transformation, International and National Actors

The neoliberal transformation of Turkey effectively started with the military

coup in 12 September 1980 like in Chile. Export-led strategies were initiated by the

abandonment of the ISI, which yielded to flexible labour market arrangements and

high levels of unemployment. Military regime (1980-1983) aimed to discipline

industrial relations and labour market; therefore, it was supported by the capitalist

class. In the time of the coup, even though political parties, trade unions, and civil

society organizations were banned, only TÜSİAD was exempted from these

310

Available at: http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_INSTRUMENT_ID:312267:NO. 311

Available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102893. 312

SPO, First Development Report (1963-1967) (Ankara: SPO), p. 108. 313

SPO, Second Development Report (1968-1972) (Ankara: SPO), p. 213. 314

SPO, Third Development Report, p. 804. 315

Tülay Arın, “The Poverty of Social Security: The Welfare Regime in Turkey”, in Neşecan Balkan and Sungur Savran (eds.), The Ravages of Neoliberalism: Economy, Society and Gender in Turkey (New York: Nova Science Publishers, 2002), p. 80.

102

measures.316 In fact, the increased disputes between the government and the United

States and the IMF drew reaction of the capital groups on the road to the coup in

1979.317

Turgut Özal, the architect of January 1980 stabilization package and later the

leader of Motherland Party, was elected as Prime Minister by 45 per cent of the total

votes in 1983. One of the significant provisions of the stabilization package was to

facilitate the market economy and Özal eagerly committed to this provision.318 The

impact of capital groups on the cabinet was explicit that sixteen of twenty ministers

had worked in the private sector before and had organic links with TÜSİAD.319 The

Motherland Party, following the authoritarian tendencies of the military regime,

applied necessary regulations to remove obstacles upon capital groups such as

unionism and high level of employee wages.320 Therefore, labour rights were

repressed severely and real wages were reduced significantly during the period of

1980-1988.321 For instance, real wages in the public sector and private sector declined

by almost half and about 20 per cent respectively.322

In the case of pension reforms, rather than a radical transformation a

moderate one was preferred as social security contributions and tax burden of

employers were reduced to protect their position. However, the rate of employee’s

316

Roy Karadag, “Neoliberal Restructuring in Turkey: From State to Oligarchic Capitalism, Max Planck Institute for the Study of Societies Discussion Papers (Discussion Paper No. 10/7, 2010), p. 13. 317

Korkut Boratav, 1980’li Yıllarda Türkiye’de Sosyal Sınıflar ve Bölüşüm (Ankara: İmge Kitabevi, 2005), p. 90. 318

Erdinç Tokgöz, Türkiye’nin İktisadi Gelişme Tarihi (1914-2004) (Ankara: İmaj Yayınevi, 2004), p. 204. 319

Cited in Karadag, 2010, p. 16. 320

Boratav, 2005, p. 91. 321

Özlem Onaran, “Adjusting the Economy through the Labour Market: The Myth of Rigidity”, in

Neşecan Balkan and Sungur Savran (eds.), The Ravages of Neoliberalism: Economy, Society and Gender in Turkey (New York: Nova Science Publishers, 2002), pp. 182-183. 322

Şerife Özşuca, “Küreselleşme ve Sosyal Güvenlik Krizi”, Ankara Üniversitesi SBF Dergisi (Cilt: 58, No: 2, 2003), p. 137.

103

contribution was increased inevitably in 1981. The social security contributions were

also indexed to the inflation.323

The neoliberal orientation of labour and pension policies could be observed in

Development Plans for five years following the Constitution of 1982. According to

the Article 60 of the 1982 Constitution, Turkey is a welfare state; “everyone has the

right to social security and the state shall take the necessary measures and establish

the organization for the provision of social security”.324 However, at the same time,

the provisions of the 1982 Constitution emphasized for the first time the role of

private sector in the field of health. It was followed by the subsequent Five Year

Development Plans. For instance, the inducement of private health institutions, the

pricing of health services, the reorganization of social security institutions instead of

state subsidies were appealing provisions of the Fifth Development Plan (1985-

1989). The plan highlighted that the level of social security contributions should be

reorganized to lower the production costs. Moreover, it was planned to increase the

retirement age for men and women to 60 and 55 respectively. The plan envisaged

legislative initiatives to remove differences between workers and civil servants.325

The emphasis on private health services was also explicit in the Sixth

Development Plan (1990-1994). Yalman argued that this Plan, which was prepared

in 1989, brought the end of state’s tradition of development targeting. In other words,

“the state would no more pursue the goals as development and social welfare”.326

Besides, the plan aimed to prepare necessary legislations to develop part-time

working facilities.327

The Seventh Development Plan (1996-2000) called for a comprehensive

social security reform that reserved a significant part to pension reform. In this

context, one of the fundamental aims was to bring all three social security

organizations under one institution and to provide standardization among the relevant

323

Sallan Gül, 2006, pp. 285-286. 324

Türkiye Cumhuriyeti Anayasası (1982), Available at: http://www.anayasa.gen.tr/1982ay.htm.

325

SPO, Fifth Development Report (1985-1989) (Ankara: SPO), pp.134, 152-154. 326

Galip L. Yalman, Transition to Neoliberalism: The Case of Turkey in the 1980s (İstanbul: İstanbul Bilgi University Press, 2009), p. 325. 327

SPO, Sixth Development Report (1990-1994) (Ankara: SPO), p. 303.

104

norms and rules. Then, the parameters of the pension system as retirement age,

contribution period, replacement rate were planned to change. The plan also gave

importance to the inducement of private pension insurance facilities.328 Regarding

health policies, opening of public hospitals and health services, which were reserved

to some middle classes such as public servants, to all levels of society was proposed.

The plan complained about the underdevelopment of private health services and

incomplete legislation regarding labour market flexibility.329

The Eighth Development Plan exalted the realized changes in the pension

reform, whereas, it admitted that the struggle against poverty was limited due to the

macroeconomic conditionalities of the governments such as interest payments.

Moreover, although unemployment level surmounted to 11 per cent in average, about

30 per cent of the educated youth in urban cities, the plan pursued to emphasize the

necessity of labour market flexibility.330

All development plans after 1980 involved a basic contradiction. They

targeted to increase the social security coverage and the number of actively insured

people as well as to create more flexible labour market. In fact, the level of social

security coverage has an increasing trend but this is not related to the share of

actively insured but indicates that the number of dependents has been increasing. The

underlying reason of the escalation of the rate of the dependents in the pension

system has been the privatization of state enterprises and the temporary employment

practices.

The Legislative Decree No. 233331

of 8 June 1984 created a third category of

“contract workers” in public work in addition to civil servants and employees. The

fundamental underlying reason was to make state enterprises much more attractive in

the privatization process since these workers were excluded from union membership

328

SPO, Seventh Development Report (1996-2000), (Ankara: SPO), pp. 111-117. 329

SPO, Seventh Development Report, pp. 44-45, 51. 330

SPO, Eighth DevelopmentReport (2000-2001) (Ankara: SPO), pp. 75, 103-104. 331

Legislative Decree 233 on State Economic Enterprises, Official Gazette (No. 18435, 18.06.1984).

105

and collective bargaining rights.332 Contract work and outsourcing have been the

basic reasons of temporary employment since then. As employees have been hired

via mediating subcontractors in temporary employment, they are not recognized

officially which means that they are also out of social security rights. Thus, the

proportion of workers in these subcontracted enterprises reached to 15 per cent in

just one decade, while it was only 4 per cent in 1986.333 The absence job security, the

widespread practice of subcontracting and its impact on collective bargaining have

constituted the main reasons of the declining trade union power.334 Subcontracting

system has created a huge group of people without established social rights of civil

servants and established strike and collective bargaining rights of ordinary

workers.335 In other words, being employed is no more sufficient to get social

security rights. The type of employment is the main determinant of becoming

insured.336 In sum, while temporary employment was 5 per cent in 1985, it reached to

the level of 14 per cent in 1997.337

The retirement age was increased to 60 for men and 55 for women in 1990.

But this situation was maintained in a very limited time. Instead of a pension reform,

early retirement provisions were applied to reduce the number of employees in the

public sector due to the scaling down of the state in line with the neoliberal

discourse.338 It should also be considered as an attempt to get the consent of the

workers and to facilitate privatization of state enterprises. Furthermore, the

Motherland Party gave way to the “super pensions” by introducing additional ceiling

and flat rates for the calculation of benefits in the SII system in 1986 to enable high-

332

Toker Dereli, “The Impact of Privatization on Industrial Relations in Turkey”, in Prof. Dr. Nusret Ekin’e Armağan (Ankara: TÜHİS, Yayın No: 38, 2000), pp. 440-441. 333

Sürhan Cam, “Neo-Liberalism and Labour within the Context of an ‘Emerging Market’ Economy-Turkey”, Capital & Class (Vol. 26, Issue. 77, 2002), pp. 95-96. 334

Dereli, 2000, p. 447. 335

Sallan Gül, 2006, p. 289. 336

Arın, 2002, p. 77. 337

Cam, 2002, p. 94. 338

Arın, 2002, p. 80.

106

income groups that could pay more premiums to receive higher pension benefits in

the old-age.339

The real wages increased after 1989 elections owing to the labour unions’

effective struggles. However, the1994 financial crisis was the end of this period and

the post-89 gains eroded after the implementation of the 1994 stabilization

program.340 In line with Onaran’s calculations for the years of 1982-1995, although

the real unit labour cost had decreased since 1983 with the exception of 1990-1994

period, the unemployment rate did not decrease accordingly. 341

In the 1990s, liberal scholars developed arguments related with the increasing

dependency ratio in the pension system and the increasing level of budget transfers to

close social security deficits in convergence with the positions of capital groups and

the IFIs. The limited coverage of social security system and the impact of its fiscal

deficit on external borrowing were enumerated as the reasons in the agenda of

pension reform. Moreover, the generosity of benefits and unreasonably early

retirement ages due to the populist policies were the argued problems of pension

systems by liberal scholars.342 By generosity, in fact, they questioned the status of

pension system for civil servants. According to Sayan, this group had been a

privileged status due to its historical ties in the long bureaucratic tradition of Turkey.

Therefore, governments abstained from any changes in this system in order to avoid

political risks and to make public services attractive for employment.343 Social

security system, due to its deficit, was seen as one of the most significant obstacles in

the economic growth process of Turkey. The privatization option was presented for

339

Burcu Yakut-Çakar, “Turkey” in Bob Deacon and Paul Stubbs (eds.), Social Policy and International Interventions in South East Europe (UK: Edward Elgar Publishing, 2007), p. 119. 340

Onaran, 2002, pp. 182-183.

341

Onaran, 2002, pp. 187-188. 342

Tuncay Teksöz and Serdar Sayan, “Simulation of Benefits and Risks after the Planned Privatization of the Pension System in Turkey”, Emerging Markets Finance and Trade (Vol. 38, No. 5, September-October 2002), p. 24. 343

Serdar Sayan, “Political Economy of Pension Reform in Turkey”, in Sumru Altuğ and Alpay Filiztekin (eds.), The Turkish Economy: The Real Economy, Corporate Governance and Reform (London: Routledge, 2006), pp. 254, 258.

107

the indebted SII and Bağ-Kur to reduce their deficit.344 Moreover, it was claimed that

funded pension systems would be much more effective in providing social security

and deepening financial markets rather than traditional PAYGO system.

The detection of the problem could be considered as true but the underlying

reason was different. Contrary to the arguments of liberal scholars, capital

representatives, the IFIs and government institutions, the primary cause of

deprivation in the pension system was the transformation in industrial relations and

labour market owing to the neoliberal economic policies, which were legitimated by

the argument that Turkey’s comparative advantage in labour-intensive sectors could

be best realized by them.345 Put it differently, flexible labour market applications was

the real reason behind the problems of the pension system. Moreover, neoliberal

economic policies aimed to reduce production costs, namely real wages, in order to

become more competitive in the international market and to appeal foreign capital

injections.346 The reduction in wages also meant the reduction in social security

contributions. Furthermore, the state only contributed to PEPF as an employer.

Instead of making contributions to the SII and the Bağ-Kur, the state transferred

resources to these institutions in order to finance deficits.

The finance structure of the pension system was eroded due not only to labour

market flexibilization, but also to the premium collection problems and the misuse of

social security funds. Neoliberal turn in the 1980s was followed by the increase in

inflation and interest rates. Instead of paying social security premiums and making

344

Erdal Gümüş, “Sosyal Güvenlik Sisteminin Geleceği Umut Veriyor Mu?”, Gazi Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi (Cilt: 6, No: 3, 2004), pp. 3, 10-14. 345

Erinç Yeldan and Ahmet H. Köse, “Türk Sosyal Güvenlik Sisteminin Yapısal Sorunları Üzerine Gözlemler”, Mülkiye Dergisi (Cilt: XXIII, Sayı: 217, Temmuz-Ağustos 1999); Emin Alper, “Emeklilik Reformları: Dünya Bankası, Avrupa Birliği ve Türkiye”, Boğaziçi Üniversitesi Sosyal Politika Forumu, Araştırma Raporu (İstanbul, 2004); Arın, 2002; Ayşe Buğra and Çağlar Keyder, “The Turkish Welfare Regime in Transformation”, Journal of European Social Policy (Vol. 16, No. 3, 2006); Korkut Boratav and Metin Özuğurlu, “Social Policies and Distributional Dynamics in Turkey: 1923-2002”, in Massoud Karshenas and Valentine Moghadam (eds.), Social Policy in the Middle East: Economic, Political and Gender Dynamics (New York: Palgrave Macmillan, 2006); Yavuz Yaşar, “The Crisis in the Turkish Pension System: A Post Keynesian Perspective”, Journal of Post Keynesian Economics (Vol. 36, No. 1, 2013); Özşuca, 2003, p. 141. 346

Özşuca, 2003, pp. 135-137; Sallan Gül, 2006, pp. 282-283.

108

productive investments, the employers preferred to enjoy financial profits.347

Even

though there were many legal arrangements concerning penalties for unpaid

premiums, most of them were abolished by Law No. 3786348

in 1992.

The State Investment Bank was transformed into the Export Credit Bank of

Turkey in 1987 parallel to the move towards export-led model. Therefore, social

security funds started investing in the bonds of Turk Eximbank. In other words, these

funds were started to be used for financing exports after financing of industry and

contributing to the capital market development. However, state-owned enterprises,

funded by social security institutions, became favourites of privatization agenda in

the 1990s. As they were privatized, social security funds evaporated.349

Trade liberalization and financialization had also negative impact on the

sustainability of the pension system. The deregulation of the foreign capital

transactions was completed and Turkish Lira became fully convertible in foreign

exchange markets with the Legislative Decree 32 of 1989.350 “The classical

accumulation episode based on wage suppression had come to a halt by 1989”351 and

Turkey became exposed to short-term hot money flows and financial crisis.

Repetitious crises from 1994 to 2001 and then in 2008, which were the outcome of

financialization and neoliberal policies, also severely affected the level of

unemployment and the fiscal balance of the pension system and deteriorated the

situation of the poor.

Turkish economy was hit seriously in the economic crisis of 1994. In order to

regulate the economy, the coalition government prepared a very “painful recipe” that

was announced on 5 April with the famous motto of “everyone should sacrifice”. Put

347

Erol Akı and Sevda Demirbilek, “An Analysis of Finance Problems of Social Insurance Institution in

Turkey”, D.E.Ü.İ.İ.B.F. Dergisi (Cilt: 17, Sayı: 1, 2002), p. 3; Yalman, 2009, p. 295.

348

Law on Attachment of Provisional Article to Social Insurance Act Number 506, Official Gazette

(No. 21171, 14.03.1992).

349

Petrol-İş, “Petrol-İş’in Araştırması: SSK’nın Fonları Nasıl Buharlaştırıldı?” (12.12.2005), Available at: http://petrol-is.org.tr/haber/petrol-isin-arastirmasi-ssknin-fonlari-nasil-buharlastirdildi-648. 350

Legislative Decree 32 on Protection of the Value of Turkish Currency, Official Gazette (No. 20249, 11.08.1989). 351

Korkut Boratav, Erinç Yeldan and Ahmet H. Köse, “Globalization, Distribution and Social Policy: Turkey, 1980-1998”, CEPA Working Paper Series I (No. 20, 2000), pp. 5-6.

109

it differently, everyone but particularly the workers should sacrifice to reach a social

compromise in the crisis environment. One of the appealing measures of the reform

package was pension reform that included the rise of contribution period to 9,000

days for men and 7,200 days for women. Besides, it was decided to induce private

health and pension insurance. But the most disappointing goal was to decrease the

retirement wages to provide current balance in the economy.352 As the crisis

environment increased the rate of unemployment and poverty and there was limited

social security coverage, the recipe intensified social problems in the country.

In short, Turkish pension system became the target of neoliberal policies and

structural adjustment program, while the reform agenda was prepared by the ILO at

the request of the government. The World Bank and the IMF have become the main

players of the reform process during the 1990s owing to their structural aids.

Moreover, the EU confirmed the eligibility of Turkey for accession in 1997 and by

this way, has become one of the inspectors of the social security reform process in

Turkey. This institutional framework will be problematized in the following section.

4.2.2.1 The Role of International Actors

In the Turkish case, the World Bank, the ILO and the IMF played an

important role to realize the social security reform project. While the World Bank

made the first warning and proposed the reform options for the countries of the South

and provided necessary funds, the ILO prepared a special reform project for the

Turkish reform with the help of Health Insurance Commission of Australia. It can be

argued that the role of the IMF in this process has been more crucial than the others

since the Fund has enforced the reform requirements throughout the stand-by

agreements. Put it another way, the IMF has become the inspector of social security

reform in Turkey on the eve of 17th

Stand-By Agreement. The European Union

candidacy statute of Turkey made the Union also effective in this process. The social

security reform became one of the important issues of the EU Progress Reports for

352

“5 Nisan 1994 Kararları”, Sınıf Mücadelesi (Sayı: 118, 2008), Available at: http://www.sinifmucadelesi.net/spip.php?article63.

110

Turkey and has been watched closely. In sum, Turkey was enclosed by four

international actors to apply neoliberal pension agenda.

4.2.2.1.1 World Bank

In the World Bank’s report of 1994, titled Averting the Old Age Crisis,

Turkey was also admitted as an ageing country. While 7 per cent of population of

Turkey was over 60 years old in 1990, the OECD average was 18.6 per cent.353

Gamble explained this strange phenomenon with the argument that leading

capitalists impose neoliberal policies to the countries of periphery relatively more

easily.354 The report stated that Turkey had a nearly insolvent pension system and

therefore was faced with the crisis of confidence. The main reason was considerable

public pension debt due to generous benefit promises. According to the report, the

huge pension debt resulted from:355

- Population ageing,

- Maturation of system,

- Early retirement facilities,

- High wage replacement,

- Low ratio of contributors to pensioners due to the informal employment

resulted from high tax requirements,

- High administrative costs,

- Low return on pension reserves owing to the inflation,

- Low ceilings on taxable earnings and

- Modest increasing rate of productivity.

This report set the ground for the reform pressure of international

organizations towards Turkey. During the long reform process, since there were

many stops, the World Bank supported reform projects in both the pensions and

353

World Bank, 1994, pp. 349-351. 354

Gamble, 2006, 27. 355

World Bank, 1994, pp. 140, 149, 155, 316.

111

health care. As we will see in the coming sections, while the World Bank was

sponsoring the reform project, the IMF has played the role of a supervisor.

The World Bank closely monitored the parametric reform of 1999 and

appraised the effort of the government to promote a private pension system. It also

warned the government that the tax incentive of the new individual private pension

system should be consistent with international practices and early withdrawals

should be penalized.356

In order to create more jobs and to decrease the level of unemployment and

informal employment, the Bank recommended the following labour market reforms

to Turkey:357

- High severance requirements should be reduced in order to increase FDI.

- Fixed-term contracts should be allowed not only for seasonal reasons but also

for economic reasons.

- A better access to collective bargaining, job security and dispute resolution

mechanism for workers should be created.

- The eligibility requirements to get unemployment insurance should be eased

to protect workers.

- Administrative capacity in Turkey’s labour market should be strengthened.

Although the Bank numbered many issues concerning the labour market, it

emphasized the first two as priority actions. In other words, the reduced level of

severance payments and the flexible labour market provisions would be the guiding

mechanisms to create additional employment. However, a more balanced pension

system could not be possible under flexible market applications and, as mentioned in

previous chapters, these applications did not decrease unemployment.

356

World Bank, Turkey: Country Economic Memorandum Structural Reforms for Sustainable Growth (Washington D.C.: World Bank, No: 20657, TU, 2000), pp. 38-39. 357

World Bank, “Turkey Labour Market Study”, Report Number 33254-TR (2006), Available at: http://siteresources.worldbank.org/INTTURKEY/Resources/361616-1144320150009/Labor_Study.pdf.

112

4.2.2.1.2 International Labour Organization

In September 1994, the ILO was asked by the Turkish Government to carry

out a project on possible reforms related to the existing pension systems and the

social assistance programs for the poor and elderly as well as the low-income

disabled class. The project, which was launched in June 1995, was monitored by a

Steering Committee led by the Undersecretariat of Treasury consisting of the

representatives of the three mentioned social security institutions, the Ministry of

Labour and Social Security (MLSS) and the State Planning Organization (SPO). In

less than a year, March 1996, the final report of the project was presented to the

Treasury. The World Bank not only financed the project but also helped the Turkish

Government in the development of the Terms of Reference (ToR) of the project.

In parallel to this project, Health Insurance Commission of Australia (HIC)

carried out a study examining the possible reforms and financing of health services in

Turkey, and presented its report in mid-1995. In addition to this, the ILO and the

HIC collaborated in a study titled “Turkish Government Social Security and Health

Insurance Project” to explore the synchronous application of social security and

health care reforms, and the possible challenges that may arise from such application.

A joint report was presented to the Undersecretariat of Treasury in February 1996. In

this section, this joint report is summarized.358

According to the ToR, the base case scenario was to determine how the

pension system would be affected in the absence of reforms. The ILO was asked to

review and analyze various reform options, the reform of institutions, the effects of

these reforms on capital markets, and the possible legislative changes. The options

identified by the ILO were as follows:

- Restructured PAYGO system that is similar to the existing system and to be

carried out by public institutions.

- A mandatory, fully-funded retirement savings system that would be managed

by private pension agencies.

358

ILO, Turkish Government Social Security and Health Insurance Project (Ankara: Undersecretariat of Treasury, 1996).

113

- Two-tier hybrid system that combines first-tier PAYGO social security

system to the mandatory second-tier system.

- Two-tier hybrid system that combines first-tier PAYGO social security

system to the voluntary second-tier system.

The effects of each option on the economy and state budget, the premiums

and social security contribution rates, the premium payers and beneficiaries of

different income levels and social security institutions were asked to be done by long

and short-term projections. Finally, in collaboration with the health care financing

consultants, the ILO was asked to examine the compliance of these options on social

security and social assistance with the recommendations of the health care system

reform in Turkey.

The outcome of the Social Security Project can be identified as follows:

- The base-case scenario analysis showed that the current system was clearly

no longer sustainable.

- There was no unemployment insurance in Turkey yet. Such an application

would temper the effects of structural adjustment.

- The premium rates were relatively high; however, the rates were applied to a

very small percentage of the earnings.

- Persons were eligible for retirement at a young age and able to take a pension.

However, the pension was at an inadequate level for a large segment, which

provide their living so.

- The supports distorted the wage structure and the employment model. The

need to finance major capital sector shortfalls pushed the private sector out of

the capital markets.

In sum, each reform would increase savings in the long-term and would lead

to the development of capital markets. The most difficult period of transition would

happen in the case of mandatory, fully-funded retirement savings system (option 2).

In any case, the reform would allow people with an adequate level of social security

assistance and reach out to both the retired and the disabled. It would help to reduce

114

the public sector deficit significantly even though the deficit would not be removed

entirely. It would let Turkey to have closer application practices as in the EU.

There were also some required measures to realize the reforms. The definition

of insurable earnings must be expanded significantly. Many of the options assume

that this insurable earnings, which was by that time 1.5 times of the minimum wage,

should raise to a level of 5 times of the minimum wage. In the future, it would

increase in line with the national economic growth. A strong correlation between

social security assistance and premiums should be ensured. A more realistic

relationship between the pension income and the level of insurable earnings should

also be established. The provisions applied for the pensions of state officials should

be reformed. A common system for the workers in both the public and private sector

should be established. The effectiveness of the social security institutions should be

provided.

According to the project, the reform process would have many difficulties:

- It required drafting of a new legislation.

- The future pensions would constitute a lower percentage of insurable

earnings. If equal sharing was to be ensured in addition to Turkey's strong

economic growth, the winners would be more than losers.

- The management problem must be solved; in particular the social security

institutions should be more flexible and autonomous. The central government

should not be responsible for the management; it should make the regulations

and should supervise the execution.

- It was possible to resolve all of these problems in a reasonable time frame.

How much time needed for the acceptance of change by key stakeholders was

much more difficult to estimate. Having dialogue with key stakeholders and

letting them to take part in the management of this re-configured system

would facilitate this process significantly.

The ILO report explicitly embraced neoliberal initials that the role of the

government was limited to organization and supervision. However, reflecting one of

the basic essentials of policy making in the ILO, the report suggested dialogue with

stakeholders to get their consent.

115

Elveren stressed that the ILO report was the main guideline for the two main

reforms in 1999 and 2006 in Turkey. The ruling government selected the two-pillar

system in which PEPF, SSI and Bağ-Kur were kept with some rehabilitation in their

structure and the private pension schemes would provide the support.359 This reform

option was also embraced by the leading capital groups and liberal academics.

4.2.2.1.3 International Monetary Fund

Turkey has been a member of the IMF since March 1947 and signed nineteen

stand-by agreements with the IMF from 1961 to 2005. The last one was completed in

2008. In this 50 years long relation, the only distinction was the ten-year period of

1984-1994 in which Turkey did not sign any stand-by with the IMF. It could be

considered that the lack of IFIs’ conditionalities postponed forced pension reform for

ten years in Turkey. However, severe economic crisis in 1994 brought the IMF again

in Turkey.

While the IMF provides economic assistance to its member countries, it

applies many constraints to release funds such as the privatization of public goods

and services, market liberalization and deregulation, being the typical conditionalities

of the neoliberal period. Reform and privatization attempts in both pension and

health care services have constituted one of the major tips of the stand-by agreements

after the 1990s. This section focuses on the related provisions of intention letters and

stand-by agreements.

In the Article IV Consultations of 1997, the IMF defined Turkish social

security system as overly generous and poorly managed and proposed a rapid action

towards increasing of the minimum retirement age and a tightening of the link

between the contributions and the benefits to control the burgeoning deficit of the

social security system.360

Turkish government declared her ambitious efforts to make parametric

reforms in the pension system and health care system in the Letter of Intent of 1998.

359

Adem Y. Elveren, “Social Security Reform in Turkey: A Critical Perspective”, Review of Radical

Political Economics (Vol. XX, No. X, 2008), p. 219. 360

IMF, “IMF Concludes Article IV Consultation with Turkey” (99/17, 5 August 1997), Available at: https://www.imf.org/external/np/sec/pn/1997/pn9717.htm.

116

The government promised to increase retirement age for the existing workers to 55

for men and 50 for women and for new entrants to 60 for men and 57 for women. It

also assured to introduce user fees in the health care facilities.361 However, there was

little progress in these until the late 1999.

The Article IV Consultations of July 1999 stressed the priority of the

parametric pension reform to ensure the financial viability of pension system.362

Unfortunately, Turkey was hit by a devastating earthquake on 17 August 1999. The

disaster area was the industrial heartland and the most densely populated section of

Turkey. The IMF offered help to the Turkish government to deal with this disaster

but even in such a sad time made reference to the ongoing economic program that

involved privatization and social security reform.363 Thus, the IMF approved

emergency assistance fund for Turkey on 13 October 1999, but this was done by

encouraging the Turkish government to continue structural reforms including

pension reform.364

Up-front fiscal adjustment, structural reform, and a firm exchange rate

commitment supported by consistent incomes policies were stated as the three pillars

of disinflation program in the Letter of Intent of 1999. The pension reform took an

important place among the four key areas of structural reform. Other areas were

agricultural reform, fiscal management and transparency, tax policy, and

administration. The government was happy to declare that the first part of a

comprehensive agenda for pension reform was completed since parametric changes

in the pension system had been approved by the Parliament in September 1999. In

fact, the government achieved higher retirement ages than it promised in the 1998

Letter of Intent. Moreover, the Turkish government announced its plan to deepen

pension reform in terms of making administrative changes and creating a legal

361

Undersecretariat of Treasury, “Letter of Intent” (26 June 1996), Available at: https://www.imf.org/external/np/loi/062698.htm. 362

IMF, “Turkey-IMF Mission for the 1999 Article IV Consultation Discussions and Third Review of the Staff Monitored Program” (2 July 1999), Available at: http://www.imf.org/external/np/ms/1999/070299.htm. 363

IMF, “Camdessus Expresses Deepest Sympathy with Turkey Following Earthquake” (99/48, 17 August 1999), Available at: https://www.imf.org/external/np/sec/nb/1999/nb9948.htm. 364

IMF, “IMF Approves USD 501 Million in Emergency Assistance for Turkey” (99/49, 13 October 1999), Available at: http://www.imf.org/external/np/sec/pr/1999/pr9949.htm.

117

framework for private pension funds to diversify the sources of long-term savings.365

Then, 17th

Stand-By Agreement was made by appraising the realized pension reform

as a major turning point.366

Twin sister of the IMF, the World Bank also supported the four-tier structural

adjustment program. By this way, the pension reform was launched in the late 1999

and was reinforced by the following commitments under the Economic Reform

Loan:367

- Implementation of the PAYGO reform,

- Implementation of the administrative and institutional program,

- Implementation of the plan to reduce all contribution arrears,

- Implementation of the unemployment insurance,

- Implementation of the legal and regulatory framework to support

supplementary individual pension scheme.

At the end of 2000, the Turkish government announced that it designed a

second package of pension reform concerning the administration of the system and

the introduction of individual pension system detailed in the Letter of Intent.368 In

both 2001 and 2002, it stated its desire to continue the pension reform in respective

Letter of Intents.

After elected in November 2002, the JDP prepared a detailed Letter of Intent

that involved all aspects of fiscal-structural reforms in April 2003. Turkey declared

her ambition to pursue the pension reform in order to support medium-term fiscal

target of a continued 6.5 per cent of GNP public sector primary surplus.369 Moreover,

in the 2004 Letter of Intent, the JDP government promised not to increase pensions

365

Undersecretariat of Treasury, “Letter of Intent” (9 December 1999), Available at: http://www.imf.org/external/np/loi/1999/120999.HTM. 366

IMF, “IMF Approves USD 4 Billion Stand-By Credit for Turkey” (99/66, 22 December 1999), Available at: https://www.imf.org/external/np/sec/pr/1999/pr9966.htm. 367

World Bank, “Economic Reform Loan”, Loan Number 4549 TU (2000a), Available at: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/ECA/2004/12/15/FB1944A5BDD9DEA285256F03001638BC/1_0/Rendered/PDF/FB1944A5BDD9DEA285256F03001638BC.pdf. 368

Undersecretariat of Treasury, “Letter of Intent” (18 December 2000), Available at: https://www.imf.org/external/np/loi/2000/tur/03/index.htm. 369

Undersecretariat of Treasury, “Letter of Intent” (5 April 2003), Available at: https://www.imf.org/external/np/loi/2003/tur/01/index.htm.

118

since in that year the pensions were increased slightly to recover the vulnerable

segments of the society.370 However, discussions on a new IMF stand-by

arrangement for Turkey were adjourned on 26 October 2004. One of the reasons was

to allow time for the government to finalize structural reform proposals involving

comprehensive social security reform.371

The emphasis on 6.5 per cent of GNP public sector primary surplus was

repeated during the review discussions on the 19th

Stand-By Agreement. It was stated

by the IMF that the Turkish authorities would adopt measures to control the social

security system deficit within the program and these measures should yield a primary

surplus in 2006 that exceeds the government’s target of 6.5 per cent of GNP.372

Within this framework, the World Bank supported Turkey with a Programmatic

Public Sector Development Policy Loan (PPDPL) in 2006, which had a condition of

parametric pension reform.373

The main idea behind the IMF stand-by agreements, the World Bank

directions and structural adjustment loans was to transform the basic necessities of

the society such as social security and education into tradable commodities and to

open these areas to national and international capital groups’ profit concerns.374

4.2.2.1.4 European Union

In this section, an assessment of regular reports on progress and accession

partnership documents is given in order to understand how the EU penetrated into the

370

Undersecretariat of Treasury, “Letter of Intent” (2 April 2004), Available at: https://www.imf.org/external/np/loi/2004/tur/01/index.htm. 371

IMF, “Discussion on New IMF Stand-By Arrangement for Turkey to Resume” (04/250, 30 November 2004), Available at: http://www.imf.org/external/np/sec/pr/2004/pr04250.htm. 372

IMF, “Review Discussions on Turkey’s IMF Stand-By Arrangement Conclude Successfully” (06/107, 22 May 2006), Available at: http://www.imf.org/external/np/sec/pr/2006/pr06107.htm. 373

World Bank, “Implementation, Completion and Results Report” (2006a), Available at: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/07/20/000356161_20120720012943/Rendered/PDF/ICR23440P071050C0disclosed070180120.pdf. 374

Bağımsız Sosyal Bilimciler, 2005 Başında Türkiye’nin Ekonomik ve Siyasal Yaşamı Üzerine Değerlendirmeler (Ankara, Mart 2005), Available at: www.bagimsizsosyalbilimciler.org.

119

field of social policy, and particularly the pension issue since 1998. The EU basically

evaluated pension reform via the parameter of financial sustainability and

institutional restructuring rather than its social consequences.

As it is well-known, the EU determined the Copenhagen Criteria to check

whether a country is eligible to join the Union during the Copenhagen European

Council in 1993. According to the Presidency Conclusions:

Membership requires that the candidate country has

achieved stability of institutions guaranteeing democracy,

the rule of law, human rights and respect for and

protection of minorities, the existence of a functioning

market economy as well as the capacity to cope with

competitive pressure and market forces within the Union.

Membership presupposes the candidate's ability to take on

the obligations of membership including adherence to the

aims of political, economic and monetary union.375

Put it differently, a country should fulfill political and economic criteria and

possess the administrative capacity to implement the acquis communautaire.

Turkey’s eligibility for accession to the EU was confirmed in the Luxembourg

European Council376 in 1997 after 34 years of its first application for EU

membership. Following the meeting, the European Commission started to produce

reports to the European Council and the European Parliament on the progress made

by Turkey in preparing her for membership. In the first progress report, which was

prepared in 1998, the European Commission began to emphasize the need for the

modernization of the labour market in order to meet the needs of a competitive

economy and the structural reform in the social security institutions that had a

growing deficit.377

1999 Regular Report reflected the satisfaction of the EU regarding structural

reforms in Turkey, particularly the pension reform of 1999, since the EU defined

375

Copenhagen European Council, “Presidency Conclusions” (21-22 June 1993), Available at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/72921.pdf. 376

Luxemburg European Council, “Presidency Conclusions” (12-13 December 1997), Available at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/032a0008.htm. 377

European Commission, “1998 Regular Report on Turkey’s Progress Towards Accession”, Available at: http://ec.europa.eu/enlargement/archives/pdf/key_documents/1998/turkey_en.pdf, pp. 24, 49.

120

pension system as a heavy burden on public finances.378 The European Council

welcomed these positive developments in Turkey and its intention to continue

reforms towards complying with the Copenhagen Criteria established in Helsinki

meeting in December 1999.379 Therefore, Turkey was officially recognized as a

candidate state on the basis of the same criteria, applied to other candidate sates.

2001 Regular Report appraised the Law on Individual Pension Savings and

Investment System as an improvement in the social security reform process.380 In the

Brussels European Council meeting, December 2004, the Council stated that Turkey

implemented Copenhagen political criteria and the accession negotiations could be

opened on 3 October 2005.381 In fact, the Copenhagen Criteria do not make an

explicit reference about reform of social security systems in candidate countries.

However, accession partnership documents of 8 March 2001382, 19 May 2003383 and

23 January 2006384 required to “ensure the sustainability of the pension and social

security system” as a part of the economic criteria. Moreover, one of the medium

term priorities for Turkey was determined as to “develop social protection, notably

by consolidating the reform of the social security and pension system with a view to

making it financially sustainable, while strengthening the social safety net”. It was

also emphasized that availability of the pre-accession financial assistance, which was

378

European Commission, “1999 Regular Report on Turkey’s Progress Towards Accession, Available at: http://ec.europa.eu/enlargement/archives/pdf/key_documents/1999/turkey_en.pdf. 379

Helsinki European Council, Presidency Conclusions, 10-11 December 1999, Available at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/ACFA4C.htm. 380

European Commission, 2001 Regular Report on Turkey’s Progress Towards Accession, Available at: http://ec.europa.eu/enlargement/archives/pdf/key_documents/2001/tu_en.pdf, p. 68. 381

Brussels European Council, “Presidency Conclusions” (16-17 December 2004), Available at: http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/83201.pdf. 382

Council Decision of March 8, 2001, 2001/235/EC, Official Journal of the European Union (2001/L 85/13). 383

Council Decision of May 19, 2003, 2003/398/EC, Official Journal of the European Union (2003/L 145/40). 384

Council Decision of January 23, 2006, 2006/35/EC, Official Journal of the European Union (2006/L 22/34).

121

organized in line with Council Regulation No 2500/2001385, was directly related with

the fulfillment of the said conditions.

When the Constitutional Court abolished some articles of Law No. 5510, the

European Commission expressed her disappointment without delay: little progress

could be achieved in the field of social protection because the enforcement of social

security reform was postponed to 2008.386 Therefore, the accession partnership

document of 18 February 2008 put the economic criteria for Turkey as follows:

Continue to implement appropriate fiscal and monetary

policies with a view to taking adequate measures to

preserve macroeconomic stability and predictability.

Implement a sustainable and effective social security

system. Establish an independent regulatory and

supervisory authority in the insurance and pension sector.

Continue to strengthen administrative structures, in

particular for the coordination of social security

schemes.387

Besides, the conditionality paragraph was very explicit once again that

“failure to respect these general conditions could lead to a decision by the Council to

suspend financial assistance”.388

In sum, the EU has closely monitored the developments in the on-going

pension reform since 1998. Moreover, its commitment has increased with the

implementation of the IPS. The EU has especially given importance to the

liberalization and deregulation of the IPS market. For instance, 2008 Regular Report

welcomed the elimination of the maximum limit on investments by pension funds in

foreign securities and minimum requirement to invest in government debt

instruments. Furthermore, it was stated that “establishing an independent regulatory

385

Council Regulation No 2500/2001 of 17 December 2001 Concerning Pre-Accession Financial Assistance and Amending Regulations No 3906/89, No 1267/1999, No 1268/1999, No 555/2000. 386

European Commission, “2007 Regular Report on Turkey’s Progress Towards Accession”, Available at: http://ec.europa.eu/enlargement/pdf/key_documents/2007/nov/turkey_progress_reports_en.pdf, p. 54. 387

Council Decision of February 18, 2008, 2008/157/EC, Official Journal of the European Union (2008/L 051/4). 388

Council Decision, 2008.

122

and supervisory authority is a priority” for the IPS.389 The complaints of the EU

concerning the establishment of an independent authority in supplementary pensions

sector continued in the Regular Reports of 2011390, 2012391 and 2013.392

It is explicit that there has been a convergence in the EU and the IFIs policy

recommendations in terms of imposing pension transformation on a conditional

basis.

4.2.2.2 The Role of Turkish Capital

The problems of the pension system and reform discussions received

attention from the leading employers’ organizations and representatives of private

sector, namely, the TÜSİAD, the Union of Chambers and Commodity Exchanges of

Turkey (TOBB) and the Turkish Confederation of Employer Associations (TİSK).

TOBB, established in 1950, the highest legal entity representing the private

sector with 365 members393, argued in 1993 that the norms and regulations of

different pension institutions should be standardized; they should be brought under

one roof and become autonomous; and mandatory and supplementary private

pension schemes should be supported. For the TİSK, which was established in 1961

and comprises 22 employers’ trade unions which have 9,600 affiliate business

389

European Commission, “2008 Regular Report on Turkey’s Progress Towards Accession”, Available at: http://ec.europa.eu/enlargement/pdf/press_corner/key-documents/reports_nov_2008/turkey_progress_report_en.pdf, pp. 41, 49. 390

European Commission, “2011 Regular Report on Turkey’s Progress Towards Accession”, Available at: http://ec.europa.eu/enlargement/pdf/key_documents/2011/package/tr_rapport_2011_en.pdf, p. 64. 391

European Commission, “2012 Regular Report on Turkey’s Progress Towards Accession”, Available at: http://ec.europa.eu/enlargement/pdf/key_documents/2012/package/tr_rapport_2012_en.pdf, p. 53. 392

European Commission, “2013 Regular Report on Turkey’s Progress Towards Accession”, Available at: http://ec.europa.eu/enlargement/pdf/key_documents/2013/package/brochures/turkey_2013.pdf, p. 30. 393

Available at: www.tobb.org.tr.

123

premises394, the best solution to the problems of the pension system was not

privatization but to supplement the system with private pension scheme.395

TÜSİAD, established in 1971, is a voluntary civil society organization that

comprises leading entrepreneurs from the Turkish business. TÜSİAD have some 600

members that represent approximately 3,500 industrial and service sector companies

that generate about half of all value-added created in Turkey.396 As TÜSİAD carried

out a continuous propaganda on the pension reform and deliberated pension

privatization, this section examines the systematic involvement of the TÜSİAD in

the pension reform process with its working groups and publications.

TÜSİAD, the biggest organization of capital representatives, gave the clear

signals for its demands for the diminishing of the welfare state in Turkey with its

report Optimal State in 1995. The report argued that the welfare state resulted in low

level of savings and unwillingness to work due to state guarantee, abuse of economic

and social rights and raised financing problems.397 Therefore, the boundaries of the

welfare state should be reorganized. The reasons enumerated by TÜSİAD were the

same with the arguments of the well-known liberal scholars, mentioned in the first

chapter. TÜSİAD’s definition of the optimal state might be explained by Gamble’s

argument that neoliberalism requires the strong state to free the economy which can

be ensured by limiting state functions in economic and social areas while

strengthening them in defense and juridical matters. In order to forge the optimal

state, the state should be restructured through the restructuring of the public

administration and public economy.398

The following year TÜSİAD published another report, titled Retired and

Happy. It offered some solutions to the problems of the Turkish social security

394

Available at: www.tisk.org.tr. 395

Ufuk Aydın, “Sosyal Güvenlikte Özelleştirme Sebepler ve Uygulamalar”, Çimento İşveren Dergisi (Cilt: 5, Sayı: 12, 1998), pp. 13-14. 396

Available at: www.tusiad.org. 397

TÜSİAD, Optimal Devlet: Kamu Ekonomisinin ve Yönetiminin Yeniden Yapılanması ve Küçültülmesine Yönelik Öneriler (İstanbul: TÜSİAD, Şubat 1995), pp. 75-76. 398

TÜSİAD, 1995, pp. 147-150.

124

system and mentioned about private insurance initiative. Unsurprisingly, the reform

in Chile was praised in the report that;399

- pensions system in Chile had shifted from PAYGO to capitalization method

successfully,

- the budget deficit that was resulted from transition costs was closed by

exporting treasury bonds,

- there was a reduction in the interest rates following 10 years of the reform

due to increase in saving trend.

The proposed solution was to establish a private pension system in a

competitive environment rather than state-dominating system.400 José Pinera, the

architect of Chilean pension privatization, was hosted in Turkey by TÜSİAD in order

to explain them the Chilean experience.401 A draft social security reform was

prepared in 1995 but could not be put into effect owing to the efforts of organized

labour.402

Pension reform continued to be on the agenda of TÜSİAD in 1997. In the

report of Restructuring of the Turkish Social Security System, the high premium ratio

for employers, deterioration of active/passive balance and early retirement practices

due to the populist policies, finance deficit and insufficient amount of pension

payments were determined as the reasons of pension system crisis.403 Consequently, a

multipillar pension system should be organized around some basic principles that

propose that:404

- Political interference should be lowered.

399

TÜSİAD, Emekli ve Mutlu: Türk Sosyal Güvenlik Sisteminin Sorunları, Çözüm Önerileri ve Özel Sigortacılık Girişimi (İstanbul: TÜSİAD, Ocak 1996), pp. 31-32. 400

TÜSİAD, 1996, p. 41. 401

Yıldırım Koç, “Kamunun Sağlık ve Sosyal Güvenlik Sistemleri Stratejik Önemdedir”, Yol-İş Sendikası Dergisi (Nisan 2008). 402

Yıldırım Koç, “Sosyal Güvenlik Reformu”, Mülkiye Dergisi (Cilt: XXIII, Sayı: 217, Temmuz-Ağustos 1999), p. 101. 403

TÜSİAD, Türk Sosyal Güvenlik Sisteminde Yeniden Yapılanma: Sorunlar, Reform İhtiyacı, Arayışlar, Çözüm Önerileri (İstanbul: TÜSİAD, Ekim 1997), pp. 13-14. 404

TÜSİAD, 1997, pp. 14-16.

125

- The state should contribute the pension system in order to alleviate the

burden on the employer and employee.

- The individual’s responsibility should be prioritized.

- As the social security was under the guarantee of the state defined by the

Constitution, the role of the state should be defined according to current

socio-economic conditions and political environment in Turkey.

- Individual private pension accounts would yield to the development of capital

and stock market. By this way, long-term public debt facilities would enlarge

and financial markets would be deepened.

After the parametric pension reform of 1999 and the introduction of

Individual Pension System in 2003, TÜSİAD continued to stress developments in the

pension system with its report of Reforming the Turkish Pension System, which was

published in 2004. The report evaluated the 1999 reform and stated that the expected

results such as the prevention of informal employment, lowering of the social

security finance deficit, and the reorganization of social security institutions were not

realized. Therefore, TÜSİAD pursued its prior orientation towards a much more

comprehensive pension reform that consisted of a multipillar pension system. The

contributors of the report came to share the view that reducing the degree of state

involvement in the pension system was necessary. The report also involved the basic

neoliberal discourse such that the new system must give individuals more

responsibility and power in deciding what type of a retirement income they desired.

Increase in private savings was expected to deepen financial markets in the country

and would accelerate economic growth through faster capital accumulation.405

The report also suggested three options to finance the reform:406

- Revenue from long-delayed privatization of major assets such as Turkish

Airlines and Turk Telecom,

- Adjustment loans from the IMF and the World Bank,

- Revenue from temporary taxes.

405

TÜSİAD, Türk Emeklilik Sisteminde Reform: Mevcut Durum ve Alternatif Stratejiler (İstanbul: TÜSİAD, Kasım 2004), pp. 17-23. 406

TÜSİAD, 2004, p. 174.

126

This thesis argues that all three options were in favour of TÜSİAD’s

members. It would not be a surprise that the winners of the privatization efforts

would be the members of TÜSİAD or their affiliates. Adjustment loans of the IFIs

would intensify neoliberal order within the country and additional taxes would

enhance capital’s domination over workers by increasing tax burden on them. It is

unambiguous that TÜSİAD fully endorsed the World Bank’s approach towards the

pension reform.

4.2.2.3 The Reform Process

The reform of the Turkish pension system has been on the agenda since the

1990s owing to the problems in the system: limited coverage, limited state

contribution, premium collection problems, informal employment, active/passive

imbalance, ineffective use of social security funds, populist policies and lack of

coordination among social security institutions due to different norms and standards.

As mentioned before, firstly the World Bank warned that population ageing

(which would not be a problem in near future) and sustainability of public finance

necessitated a pension reform. After this, the study of the ILO drew a roadmap for

Turkish government. The Bank did not only give advice but also finance support.

Turkey received the largest loan407 (USD 197.7 mm) among the European and

Central Asian countries without a mandatory funded pillar. Moreover, social security

reform constituted an important part of the IMF conditionalities to release the

necessary funds during the period of 1998-2008. The reform process accelerated with

the election of the JDP in 2002 and the developments in the pension system since

2002 have reflected that the JDP embrace the recommendations of capital

representatives and collaborate fine with the IFIs.

407

Independent Evaluation Group, 2006, p. 66.

127

4.2.2.3.1 1999 Reform

The first step in the reorganization of pension system was the enactment of

the Unemployment Insurance Law No. 4447408

in 1999, which also changed the

parameters of the pension system.

The government tried to bring together the representatives of both the

employees and employers in the legislation process of the draft social security reform

in the first half of 1999. The limited job security in the draft unified the leading

workers’ trade unions around the famous slogan of “retirement in grave”. As the

biggest confederation of employers, TİSK, refused to discuss the issue of job

security, the negotiation process yielded to nothing. However, consultations

continued and a joint proposal was sent to the MLSS. Nevertheless, the result was

not satisfactory for workers. The Labour Platform409, which involved the leading

public and private workers’ trade unions as well as some vocational associations,

organized the biggest joint action of country’s history on 24 July 1999 in Ankara

against the draft social security reform law. This was followed by another action on 4

August, the day for the negotiation of draft in the Parliament. Although the

government withdrew the draft, it decided to bring it to the Parliament without any

change next week. The organized labour carried out a common action throughout the

country on 13 August. In conclusion, the draft was admitted at the shadow of

earthquake on 25 August and labour platform could not continue its resistance due to

the earthquake and its devastating impact on the country.410

The basic parameters of the pension system were changed. The minimum

retirement age was increased to 58/60 for women and men in the case of new

entrance and 56/58 for current women and men contributors with a transition period.

The minimum period of contribution was increased from 5,000 days to 7,000 days

for SII pensioners. Besides, the Law No. 4447 developed unemployment insurance

and fund in order to minimize the harmful effects of unemployment. Put differently,

408

Official Gazette (No. 23810, 08.09.1999). 409

TÜRK-İŞ, HAK-İŞ, DİSK, KESK, KAMU-SEN, MEMUR-SEN, TMMOB, TÜRMOB, TTB, Türk Diş Hekimleri Birliği, Türk Eczacılar Birliği, Türk Veteriner Hekimleri Birliği, Türkiye İşçi Emeklileri Cemiyeti, Tüm İşçi Emeklileri Derneği, Tüm Bağ-Kur Emeklileri Derneği. 410

Koç, Temmuz-Ağustos, 1999, pp. 103-108.

128

Turkey realized unemployment insurance after 49 years after she ratified411 the ILO

Convention No. 2 Unemployment (1919)412, which required preventing

unemployment and providing insurance against it. The unemployment insurance

premium was decided to be financed by the contributions of the employee, employer

and the state. The World Bank welcomed the change in pension indexation of the SII

and the Bağ-Kur pensioners that the system was replaced by a transparent and

financially conservative rule, namely consumer price index.413

The law was the prerequisite of the disinflation program that Turkish

government started to implement in the early 2000. It should be noted that the

program was prepared in collaboration with the IMF. Even though the program

consisted of structural reforms including health and pension reform, privatization of

state enterprises, banking regulations and agricultural reform, the coming crisis was

only postponed to the end of the year, November 2000. The crisis intensified in

February 2001 owing to political disputes.

The IFIs enumerated undisciplined financial sector, banking sector failure,

populist policies, economic and political corruption as the main cause of 2001 crisis

in Turkey, similar to their attitude in the East Asian Crisis. They mentioned nothing

about the impact of international financial movements.414 Therefore, Turkey was

forced to apply another structural program.

Kemal Derviş, who was imported from the World Bank as the Minister of

Treasury immediately after the February 2001 crisis, announced the Transition

Program to a Strong Economy on April 14, 2001. The program could be summarized

as “everyone should sacrifice under the tight fiscal policy to realize economic growth

and employment”. As the fundamental focus of the program was huge public

deficits, one of the enumerated reasons of it was social security deficit that arguably

411

Available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102893. 412

Available at: http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_INSTRUMENT_ID:312147:NO. 413

World Bank, 2000, p. 33. 414

Yılmaz Akyüz, The Political Economy of Turkey (London: Pluto Press, 2005), p. 109.

129

resulted from actuarial imbalances.415 Moreover, although everyone was called for

solidarity to recover crisis, all taken measures imposed additional burden on the

workers. Even unemployment soared due to privatization of large state enterprises.

According to Independent Social Scientists Alliance, this program in fact reflected

the interests of national and international capital groups, their common demands

were labour market flexibility and privatization. Moreover, the most problematic part

of this program was its likely negative impact on redistribution among social

classes.416 For instance, the real income of pensioners depreciated by 0.2-3.5 per cent

during the 2001 crisis.417

On 23 February 2001, the Constitutional Court abolished the articles

concerning the transition period for current public servants.418 The Draft Law on

Individual Pension Savings and Investment System became a law (No. 4632)419

on

28 March 2001 and the Individual Pension System (IPS), which is discussed later,

commenced on 27 October 2003.

Although the JDP vehemently defended the right of social security during the

first pension reform (1999-2002)420, after elected in 2002, it started to argue that the

current social security system was inefficient due to its costs, its fragmented structure

and its negative impact on labour market flexibility. Therefore, some parametric

changes should be done to reduce the costs. The fragmented structure should be

abandoned in order to standardize the norms. At last, the labour market should be

415

Türkiye’nin Güçlü Ekonomiye Geçiş Programı (14 April 2001), Available at: http://www.tcmb.gov.tr/yeni/duyuru/eko_program/program.pdf. 416

Bağımsız Sosyal Bilimciler, “Güçlü Ekonomiye Geçiş Programı Üzerine Değerlendirmeler”, Mülkiye Dergisi (Cilt: XXV, Sayı. 229, Ağustos 2001), pp. 41, 69. 417

Akyüz, 2005, p. 125. 418

Constitutional Court Decision, 2001/41, 23 February 2001, Official Gazette (No. 24592, 23.11.2001). 419

Law on Individual Pension Savings and Investment System No. 4632, Official Gazette (No. 24366,

07.04.2001).

420

Aziz Çelik, “Sosyal Güvenlik Taarruzunda Mola”, Birikim Dergisi (Sayı: 213, Ocak 2007).

130

organized on flexible working principles.421 Although the fundamental burden on the

budget variance was interest payments, the liberal community insisted on budget

transfers to social security institutions while it was only one-fifth of interest

payments.422

One of the most appealing issues of the Urgent Action Plan of the JDP

government, announced on 3 January 2003, was social security reform under the

ostensible target of “social security for everyone”.423 In fact, the reform of social

security institutions and the inducement of private health and life insurance

companies were planned in the Development and Democratization Program of the

JDP424 even before the election. As a result, the government prepared a Draft Law on

Social Security Institution and the Law on Social Insurance and General Health

Insurance. Unsurprisingly, the health provisions of the draft reflected the main liberal

discourse of the “right to choose” the doctor and health institution.

The JDP government replaced the Labour Law of 1971 with a new

comprehensive Law No. 4857 in May 2003, which institutionalized part-time work.

The only exception was the article concerning severance payment. Government did

not want to draw the reaction of working class in its first year of administration. In

addition to part-time work, the concepts of make-up work and on-call work became a

legal regulation by the adoption of such law. The fundamental aim of all these

arrangements was to draw the legal boundaries of flexible labour market and

mechanisms of control over labour.

The Draft Law on Social Security Institution Organization No. 4947425 was

approved in June 2003 and brought the SII and Bağ-Kur under the umbrella of the

roof institution. According to the Law, the newly established institution was

421

Simten Coşar and Metin Yeğenoğlu, “The Neoliberal Restructuring of Turkey’s Social Security System”, Monthly Review (April 2009), pp. 39-41. 422

Bağımsız Sosyal Bilimciler, “2003 Başında Türkiye Ekonomisi ve AKP’nin Hükümet Programı Üzerine Değerlendirmeler”, Available at: www.bagimsizsosyalbilimciler.org. 423

58. Hükümet, Acil Eylem Planı (2003), Available at: http://www.linux.org.tr/wp-content/uploads/2010/04/AcilEylemPlani.pdf, pp. 102-104. 424

Adalet ve Kalkınma Partisi, Kalkınma ve Demokratikleşme Programı (Ankara: AKP, 2002), pp. 84-85. 425

Official Gazette (No. 25178, 24.07.2003).

131

organized as an affiliate of the MLSS. In 2005, the government made a radical

legislation in order to transfer healthcare units of some public institutions and

organizations to the Ministry of Health.426

By this way, the SII was turned into an

organization that buys health services rather than produces health services.427

4.2.2.3.2 2006-2008 Reforms

A revised version of Law No. 4947 was discussed in the Parliament in the

early 2006 to establish one roof for all social security organizations. The Law No.

5502428, which was approved on 16 May 2006, established Social Security Institution

(SSI) (Sosyal Güvenlik Kurumu) that also involved the PEPF. The Law removed

tripartite structure of the Turkish social security and achieved an “important step” in

the management and auditing of social security programs. Before 2006, the PEPF

used to work under the Ministry of Finance while SII and Bağ-Kur used to be

responsible towards the MLSS. Today the umbrella institution, SSI works under the

MLSS though it has administrative and financial autonomy protected by the Law. By

this way, different social security regimes have been brought together and the social

security approach was reduced to basically one of fund management by ignoring

sectoral differences and employment status. The convergence between three

institutions was realized on the basis of least common denominator. The result was

the deterioration of social rights of civil servants.429 As this group commonly formed

the middle classes of Turkey and was claimed to be historically privileged group, this

result was very compatible with the goal of the JDP government. In other words, this

law was a useful attempt to diminish the power of middle classes opponent to the

JDP in Turkey.

426

Law on Transfer of Healthcare Units of Some Public Institutions and Organizations to the Ministry

of Health No. 5283, Official Gazette (No. 25705, 19.01.2005).

427

Yenimahalleli Yaşar, 2012.

428

Official Gazette (No. 26173, 20.05.2006). 429

Bağımsız Sosyal Bilimciler, IMF Gözetiminde On Uzun Yıl 1998-2008: Farklı Hükümetler, Tek Siyaset (Ankara, Haziran 2006), Available at: www.bagimsizsosyalbilimciler.org, pp. 56-57.

132

The government continued to its efforts to transform the pension and health

structure. Within this context, the Social Insurance and General Health Insurance

Law No. 5510430

was approved in 31 May 2006. The Law introduced gradual

increases in the retirement age between 2035 and 2048 (65 years) and a single

pension formula for the tripartite system. Moreover, the indexation of civil servants’

pensions was changed from wages to inflation and the period of premium payment

was determined as 9,000 days. The income replacement rate would be implemented

as 2.5 per cent until 2015 and 2 per cent by 2016. The means-tested pension was

organized to be payable only to those with no other social security rights, who are

disabled or those aged 65 or over. The only positive provision of the law was the

establishment of state responsibility in social security premiums. The state

contribution to old-age insurance and general health insurance was determined as 5

per cent and 3 per cent respectively (one-fourth of the collected premiums). The state

was also entitled to contribute to the unemployment insurance premium by 1 per

cent.

The focus of the parametric reform in 1999 had been to provide actuarial

balance by increasing retirement ages and contribution periods and decreasing

replacement rates. As the reform in 2006 was also done with the same orientation, it

was explicit that the road to reform was not compatible with the underlying reasons

of the pension deficits. However, the real problems laid at the absence of effective

state contribution, informal employment, the abuse of social security funds, and

administrative incompetency.431

Even though the government decided to complete the reform in twelve

months in its Urgent Action Plan of 2003, the draft law was passed in 3 years.

Moreover, the realization of the law took much more time owing to the objections

and the involvement of Constitutional Court in the legislation process.

The effective date of the Law No. 5510 was planned as 1 January 2007.

However, it was postponed to 1 January 2008 due to the fact that the Constitutional

Court examined the annulment request of the 10th

President Ahmet Necdet Sezer and

430

Official Gazette (No. 26200, 16.06.2006).

431

Seyhan Erdoğdu, “Sosyal Politikada Değişim ve Sosyal Güvenlik Reformu” in İlhan Uzgel and Bülent Duru (eds.), AKP Kitabı: Bir Dönüşümün Bilançosu, (Ankara: Phonenix Kitabevi, 2009), pp. 668-669; Koç, Temmuz-Ağustos 1999, pp. 99-100.

133

deputies of the opposition party. Consequently, the Court abolished some articles of

the law, particularly those pension reform provisions pertaining to civil servants.432

The new Draft Law on Amendments to Social Security and General Health

Insurance Law and to Certain Laws and Decree (No. 5754) was submitted to the

Presidency of Turkish General National Assembly on 27 November 2007. In March

2008, the JDP government accepted to discuss the draft law with the Labour

Platform to seek its consent. However, most of the proposals of the Labour Platform

were rejected and opponent voices were largely ignored by the media which was

shaped by the JDP cadres and neoliberal economists. The draft law was ultimately

legislated side by side with the heated discussions around the headscarf issue.433

In fact, the requests and the decisions of the Constitutional Court involved

some contradictions about the right to social security. The Court basically protected

the rights of public servants. However, pension rights of people other than public

servants were not assessed in line with the principle of social state. As the Court

annulled many provisions concerning public servants, the core of one roof could not

be realized. The attitude of the Court could be explained by the historical

understanding of the state that protects its own workers.434 On the other hand, the

Court decision yielded to some positive conclusions for the members of the SII as

well. The premium contribution period for the SII pensioners was reduced from

9,000 days to 7,200 days with the implementation of Law No. 5754. The replacement

rate is preserved as 2 per cent but it would be 3 per cent for a person who has worked

fewer than 10 years.

4.2.2.3.3 The Assessment of 1999 and 2006-2008 Arrangements

The coalition government attempted to make a comprehensive reform in

1999. The organized labour, however, responded this with many protests throughout

the country since they knew that they could be successful to a certain extent in the

432

Constitutional Court Decision, 2006/36, 15 December 2006, Official Gazette (No. 26388, 26.12.2006). 433

Coşar and Yeğenoğlu, April 2009, pp. 41-42. 434

Çelik, Ocak 2007.

134

time of coalitions.435 In contrast, there was no organized action towards 2006-2008

reforms since the JDP government managed to dissolve the workers resistance power

through various political and economic strategies that have become successful due

also to the now flexible labour markets. Moreover, the JDP managed to put into

practice other informal means to manage poverty and concerns for insecurity as will

be discussed in the next section. Hence, rather than the opposition of the workers, the

Constitutional Court objections helped redefine the arrangements of the 2006-2008

reforms. It should be noted that the JDP government also produced a public image as

if there was a consensus between the government and the Labour Platform on the

2006-2008 reforms. Hence, while the pension transformation was associated with

various political and social risks in the crisis atmosphere of the years 2000 and 2001,

it became an applicable policy by the JDP’s coming to power in 2002 as a single

party government with an increasing political capability to manage the contradictions

of neoliberal transformation in Turkey.436 Still though, the JDP has to wait until 2006

until the Party managed to consolidate its political power de facto within Turkish

politics. Effective collaboration of the JDP with the IFIs, which has ensured

persistent inflow of hot money into the country, was also crucial in this outcome.

It is clear that the reform process did not bring a standardization in different

pension applications as expected. For instance, there is significant difference among

the affiliates of the SII and the other two institutions in terms of contribution periods.

The politicians consciously have focused on the retirement age and the sustainability

of the pension system, so appealed to the strategy of turning the pension issue into a

technical rather than a political one, ignoring the real reasons of pension insecurity

and the necessity of comprehensive and inclusive pension policy for whole

population.

During the legislation process of unemployment insurance in 1999 and state

contribution to old-age and general health insurance premiums in 2006, two basic

proposals were put forwarded: the state should allocate a portion of tax revenues for

the finance of the social security system, and the accumulated funds of the

unemployment insurance should be used for job creation. Nevertheless, the current

435

Interview, 24 January 2012. 436

Filiz Zabcı, Dünya Bankası Yanılsamalar ve Gerçekler (İstanbul: Yordam Kitap, 2009), p. 139.

135

practice demonstrated that the funds have been used to provide resources for Turkish

Treasury437 and financial markets.

The expected benefits of both reform processes were not realized as the

pursued aim of the 1999 and 2006-2008 reforms was to increase revenues and

decrease expenditures of the pension system by changing its fundamental parameters.

For Alper, one of the pro-reform scholars, the main reasons were the negative impact

of economic crises in 2001 and 2008 on the number of actively insured people, the

administrative incompetency and the annulment decrees of the Constitutional Court.

He also emphasized the role of “learnt poverty” among discouraged unemployed

people, which meant that these people were content with social aids instead of

looking for job.438

The actual result of this law was the deepening of insecurity and poverty,439

since contrary to liberal arguments, the pension transformation in Turkey decreased

the scope of benefits and complicated eligibility rules. Thus, the workers were forced

to borne the burden of the reform. The marketization of social security intensified the

deterioration of income distribution by supporting high-income groups with public

securities and incentives.440 The transformed public pension system and the

introduction of individual pension system mean that the present security ensures

security to those who are able to afford it since the current system deteriorated the

situation of workers and excluded the poor.441

A radical pension privatization was not realized in Turkey since governments

could not legitimize it. They could not risk the huge costs of transition from public

pension to private pension system to achieve the arguable indefinite conclusions after

437

Haluk Egeli and Ahmet Özen, “Türkiye’de Sosyal Güvenlik Sisteminin Yeniden Yapılandırılmasına Yönelik Reform Sürecinin Değerlendirilmesi”, Mevzuat Dergisi (Sayı: 142, Ekim 2009). 438

Yusuf Alper, “Sosyal Güvenlik Reformu ve Finansmanla ilgili Beklentiler”, Sosyal Güvenlik Dergisi (Cilt: 1, Sayı: 1, Haziran 2011), pp. 43-44. 439

Coşar and Yeğenoğlu, April 2009, pp. 43-44. 440

Erdoğdu, 2009, p. 684. 441

Coşar and Yeğenoğlu, April 2009, p. 48.

136

30 years when the ageing problem would emerge442 A high-ranked bureaucrat from

the Undersecretariat of Treasury confessed that although the JDP had a considerable

power that was repeated in three consecutive general elections, it would not be easy

to initiate a mandatory private pension system. It can be argued that rather than

making a radical pension reform, the JDP governments have preferred to erode the

pension rights of the middle and lower income sections of the society indirectly

through the effects of the neoliberal policies in general. Moreover, while the

privileged rights of middle classes were taken away by the social security reform,

whereas, as will be discussed below, the IPS has helped serve to the interests of not

only upper classes but also of the middle classes.

Resembling to the pension politics in the other countries of the South, the

pension rights of the working population were contracted practically due to the

implications of neoliberal economic policies. The suppression of organized labour

and flexibilization of the labour market have created suitable conditions for the

implementation of these policies with the inevitable outcome being increased poverty

owing to informal employment, low wages and limited pension provisions. The

devastating impact of economic and financial crises on the poor has been also

significant. Consequently, Turkish pension system has lost its significance for the

poor whose daily survival has been shaped primarily by the social risk and poverty

management policies of the government, dressed in Islamic cloths as will be

discussed in the next section.

Turkey was covered by the World Bank’s Social Risk Mitigation Project after

the 2001 crisis for the period of five following years. The Bank justified the project

with three basic problems in Turkey, namely high rate of poverty, limited social

security coverage and the danger of the extinction of human capital. The Project

consisted of rapid assistance, conditional cash transfer, institutional development and

local initiatives.443 The conditional cash transfers have aimed to provide children

with education, proper vaccination, and nutrition benefits.

442

Alper, 2004, pp. 19-20; Mehmet A. Elveren and Adem Y. Elveren, “Türkiye’de Refah Rejiminin Dönüşümü ve Bireysel Emeklilik Sistemi”, Mülkiye Dergisi (Cilt: XXXIV, Sayı. 266, Bahar 2010), p. 252. 443

Zabcı, 2009, pp. 112-116, 119-124.

137

Table 1. Labour Force Status (thousand)

YEAR Total

Population Population

15> age Labour Force¹

Labour Force Participation

Rate (%)² Employed Unemployed

Unemployed Rate (%)

Not In Labour Force3

1980 44.737 25.612 15.609 60.9 14.267 1.342 8.6 10.003

1990 56.473 33.821 18.417 54.5 16.845 1.573 8.5 15.404

2000 67.804 43.900 21.093 48.0 19.608 1.485 7.0 22.807

2005 67.227 48.359 22.455 46.4 20.067 2.388 10.6 25.905

2006 68.066 49.174 22.751 46.3 20.423 2.328 10.2 26.423

2007 68.901 49.994 23.114 46.2 20.738 2.377 10.3 26.879

2008 69.724 50.772 23.805 46.9 21.194 2.611 11.0 26.967

2009 70.542 51.686 24.748 47.9 21.277 3.471 14.0 26.938

2010 71.343 52.541 25.641 48.8 22.594 3.046 11.9 26.901

2011 72.376 53.593 26.725 49.9 24.111 2.615 9.8 26.867

2012 73.604 54.724 27.339 50.0 24.821 2.518 9.2 27.385

Source: Available at: http://www.tuik.gov.tr; http://www.kalkinma.gov.tr. 1Comprises all employed and unemployed persons.

2Indicates the ratio of the labour force to the population 15 years old and over.

3Discouraged workers, seasonal workers, housewives, student, retired, disabled/old/ill, having

property income, family or personal reasons and others.

The actual results of statistics verified that the neoliberal labour market

policies have aggravated the unemployment problem. The pension reform used to be

defended by a simple argument of increasing social security coverage. Although the

statistics demonstrated a slight increase in social security coverage, it has based on

an increase in the number of dependents. Moreover, the poverty rates are still high.

The average unemployment rate was realized as 8.2 per cent during the period

of 1980-2000. The result is significant for the period of pension transformation that

the unemployment rate raised from 7 per cent in 2000 to 14 per cent in 2009 (Table

1). It should be noted that labour market flexibilization did not yield low rate of

unemployment contrary to liberal arguments. Since social insurance programs are

very dependent on employment status in Turkey, the increase in the unemployment

rate has meant that a large part of labour force has been deprived of the opportunity

to get social protection. Thus, Table 1 indicates that labour force participation has not

exceeded the level of 50 per cent of the population since 2000 while it was around 60

per cent in the early 1980s. Limited labour force participation rate also gives clues

about the size of the informal employment. As mentioned before, being employed

138

does not mean being protected by the pension system due to the fact that about 40

per cent of employed people have not been regular and casual workers since 2007

(Table 2). The self-employed group is bigger than the employer and unpaid family

worker group, but self-employment jobs generally earn low levels of income. In sum,

a small portion of the employed population gets access to adequate social protection

levels.

Table 2. Employment by Status (thousand)

2007 2008 2009 2010 2011 2012

Employed 20.738 21.194 21.277 22.594 24.110 24.821

Regular/Casual Employee 12.534 12.938 12.768 13.762 14.876 15.619

Employer 1.190 1.249 1.210 1.203 1.244 1.239

Self-Employed 4.386 4.324 4.429 4.548 4.687 4.694

Unpaid Family Worker 2.628 2.683 2.870 3.081 3.304 3.269

Source: TURKSTAT, Statistical Yearbook (Ankara: TURKSTAT, 2009), p. 181; TURKSTAT,

Statistical Yearbook (Ankara: TURKSTAT, 2012), p. 183.

According to Table 3, the average social security coverage for the last eight years has

been about 83 per cent. However, the growth rate of dependents has been bigger than

the growth rate of actively insured. Furthermore, the simple average of complete

poverty rates for the period of 2002-2009 was 21.5 per cent. Regarding employment

status, the simple average of the rate of poor individuals among casual employees

and unpaid family workers was 33.6 and 33.7 per cent respectively.444 Table 2

demonstrates that while the rate of employed people increased by 19.6 per cent

during 2007-2012, the rate of unpaid family workers increased by 24.3 per cent. As

the Turkish Statistical Institute (TURKSTAT) stopped to calculate complete poverty

rates in 2010, poverty rates based on poverty line defined as dollar per capita are

available. Those below USD 4.3 per capita per day belonged to 3.66, 2.79 and 2.27

per cent of total population in 2010, 2011 and 2012 correspondingly.445 In reality, we

do not have exact poverty rates.

444

TURKSTAT, “Results of 2009 Poverty Study”, Available at: http://www.tuik.gov.tr. 445

Available at: http://www.tuik.gov.tr.

139

Table 3. Social Security Coverage (thousand)

YEAR Social Security

Coverage Total

Population Social Security Coverage (%)

2005 52.391 67.227 77.9

2006 54.667 68.066 80.3

2007 56.423 68.901 81.9

2008 57.338 69.724 82.2

2009 58.591 70.542 83.1

2010 61.506 71.343 86.2

2011 64.088 72.376 88.5

2012 62.899 73.604 85.3

Source: Available at: http://www.tuik.gov.tr; http://www.sgk.gov.tr.

Therefore, the neoliberal social security reforms in Turkey are expected to

decrease the welfare of the poorer strata of society. As one of the fundamental

objectives of the social security is to fight against poverty and inequality, traditional

PAYGO system rather than funded schemes are better in this battle since the former

requires intergenerational solidarity.446 The levels of unemployment and poverty

have demonstrated that Turkey needs a more comprehensive pension system rather

than neoliberal pension transformation.

4.2.3. The Islamic Management of the Losers of Neoliberal Pension Policies

The social security reform has been on the agenda of the governments since

the 1990s, but could be effectively implemented only under the rule of the JDP. This

section will propose that Islamic style informal anti-poverty measures, which have

indeed fit to the neoliberal agenda, have been one of the important factors to

understand why the JDP is so far successful in systematically eroding the labourers’

rights in general.

In fact, the neoliberal attack on pension and health care rights started in

Turkey after the military coup of 1980. As the employment policies are directly

446

Elveren, 2008, p. 222.

140

linked with the social security rights, the neoliberal labour market policies have

resulted not only in huge number of unemployed and informally employed but also

in huge number of poor people without pension rights. The reform agenda gained a

momentum with the introduction of the 1999 reform, while the JDP governments

have systematized social security transformation since 2002 and institutionalized

social risk management. As the JDP won three successive elections, it is important to

answer the question of why the losers of the neoliberal order supported the JDP

despite their losses due to the social security reform. In this point, it is necessary to

look how the Islamic values have been incorporated to the neoliberal management.

According to Hendrick, the 1980s could not be explained by the economic

liberalization of Turkish economy only, so the relaxation of the rules and regulations

concerning religious activities should be also taken into account. The result has been

the “mobilization of religious communities that led to a shift in the country’s state-

society relationship”. Moreover, the religious groups were given an opportunity to

penetrate the hierarchy of Turkish institutions.447 In this context, the MÜSİAD

(Association of Independent Industrialists and Businessmen) was founded in 1990 as

the representative of small and medium size enterprises. It can be regarded as the

representative of a post-fordist integration to global capitalist market with Islamic

values.448 It is not as big as TÜSİAD but its export competitiveness is significant.

The flexible production relations have been in the interest of MÜSİAD members, and

their claimed success in global competitiveness has led their being defined as

Anatolian tigers. Their political support was central to the success of the Islamic

parties in the 1990s and the 2000s.

The traditional sectors of concentration in MÜSİAD members have been

labour-intensive industries such as textile, construction, food processing and

transportation.449 These have been industries that industrial relations have been

447

Joshua D. Hendrick, “Globalization, Islamic Activism, and Passive Revolution in Turkey: The Case of Fethullah Gülen”, Journal of Power (Vol. 2, No. 3, 2009), p. 344. 448

Haldun Gülalp, “Globalization and Political Islam: The Social Bases of Turkey’s Welfare Party”, International Journal of Middle East Studies (Vol. 33, No. 3, 2001), p. 440. 449

Yıldız Atasoy, Islam’s Marriage with Neo-Liberalism: State Transformation in Turkey (New York: Palgrave Macmillan, 2009), p. 117.

141

managed through informal and personal links more; therefore, mutual trust, which is

backed by Islamic values, has been promoted as valid in these enterprises instead of

the formal labour code and industrial relations through labour unions.450 The basic

strategy of small and medium enterprises in the Anatolian cities is deunionization

and informal employment to cope with the competition in the world market.451 Many

MÜSİAD members, who were hostile to trade unions, pressed government in the

legislation process of Labour Law in 2003.452 The absence of a social policy

combating the poverty and exclusion has then given way to local governments and

religious communities to play an active role in promoting the welfare of

individuals453 that is very similar to the religious charity practices to cope with the

social question in Europe in the 18th

and 19th

centuries.454

The changing opportunities within neoliberal transformation in Turkey have

provided new openings for resource poor Islamic economic groups. The privatization

and liberalization in several sectors such as trade, education and media brought the

Anatolian social, economic and Islamic networks to the heart of Turkish economy.455

When the JDP came to power in the wake of 2001 economic crisis, corruption

that had aggravated in the previous liberalization period under centrist governments

was one of the main reasons for declining trust in the centrist parties in the 2002

elections.456 Moreover, “the JDP had a discourse against the IMF and the neoliberal

policies during the electoral campaign and presented somewhat a program involving

450

Ayşe Buğra, “Labour, Capital, and Religion: Harmony and Conflict among the Constituency of Political Islam in Turkey”, Middle Eastern Studies (Vol. 38, No. 2, April 2002), p. 195. 451

Pınar Bedirhanoğlu and Galip L. Yalman, “Neoliberal Küreselleşme Sürecinde Türkiye’de Yerel Sermaye: Gaziantep, Denizli ve Eskişehir’den İzlenimler”, Praksis (No. 19, 2009), p. 262. 452

Atasoy, 2009, p. 133. 453

Ayşe Buğra and Çağlar Keyder, New Poverty and the Changing Welfare Regime of Turkey (Ankara: UNDP, 2003), p. 14. 454

Topak, 2009, p. 127. 455

Hendrick, 2009, p. 362. 456

Ali Çarkoğlu, “Turkey’s November 2002 Elections: A New Beginning?”, Middle East Review of International Affairs (Vol. 6,No. 4, December 2002), p. 31.

142

some Islamic motifs particularly in the field of social policy”.457 For Atasoy, the

JDP’s ability to vitalize material and cultural tensions on an identity basis has made

Islam an appealing political project in the absence of powerful leftist movements.458

As it is mentioned in the previous sections that the JDP government pursued

neoliberal policies after it was elected. However, it still managed to increase its votes

in the 2007 elections and in average ensured a continued support since then.

According to Öniş, although the JDP has followed tight budgetary discipline under

the IMF conditionality during the neoliberal restructuring period, it has enlarged the

content of the coalition of winners. It has demonstrated a strong commitment to

neoliberalism but with a human face in which a charity-based locally organized

redistribution was implemented rather than a rights -and central state- based one.459

The losers of neoliberalism such as the poor, unemployed and informal labour have

managed to be incorporated into the neoliberal system through the use of Islam as an

instrument for legitimating the conservative move in social policy.

The government has also pursued an efficient class project in the

transformation of health policy. For instance, some privileges such as hospitals,

which were reserved for civil servants before, were opened to all segments of the

society even though this does not necessarily mean improvements in health

provision. Even this example was sufficient for the latter to feel themselves good.

Certainly, these provisions are done with the famous motto of “giving to labour/the

poor but without taking from capital/rich”.460 Green Card application has also made

the JDP popular among the poor.461

The JDP emphasized the importance of struggle against poverty in the

Election Declaration of 2011. Parallel to the neoliberal struggle against poverty,

which was marketed especially by the World Bank, the JDP government has focused

457

Sönmez, 2007, p. 22.

458

Atasoy, 2009, p. 108. 459

Ziya ÖNİŞ, “Conservative Globalism at the Crossroads: The Justice and Development Party and the Thorny Path to Democratic Consolidation in Turkey”, Mediterranean Politics (Vol. 14, No. 1, 2009), pp. 23-25. 460

Boratav, Yeldan and Köse, 2000, p. 28. 461

Coşar and Yeğenoğlu, April 2009, p. 38.

143

on micro credit facility for women and vocational training for poor people in order to

direct them to the employment.462

Another important characteristic of the JDP in social policy is that it has used

social assistance programs, which are provided by voluntary organizations and the

NGOs, as a substitutive of social welfare state applications.463 The proliferation of

social responsibility projects of private companies was also appealing. The JDP

government has created an understanding of the state that apparently likes benevolent

people and companies, and would support them with administrative easiness, tax

reductions and incentives in exchange of social responsibility projects for

unemployed and poor people. In fact, these incentives could be considered as an

indirect transfer of public resources to the green capital.464

4.3 Individual Pension System

The Individual Pension Savings and Investment System Law was adopted in

the Turkish National Assembly on 28 March 2001 and published in the Official

Gazette on 7 April 2001. The System officially commenced on 27 October 2003 after

the granting of eleven pension companies with the pension operation licensed by the

Treasury. The introduction of the IPS constituted an essential part of the pension

transformation in Turkey, which has been planned since the ILO’s report of 1995. In

this section, the historical background of the IPS will be discussed followed by

analyses on the structure and the working of the IPS. It is though that the

understanding the reasons of implementation as well as hitherto limited success of

the IPS, as a case for private pension system, in Turkey would attract our attention

better to the class bases of the pension transformation.

462

Adalet ve Kalkınma Partisi, Türkiye Hazır Hedef 2023, 12 Haziran 2011 Genel Seçimleri Beyannamesi, Available at: http://www.akpartiorg.tr/upload/documents/beyanname.2011.pdf. 463

Ahmet H. Köse and S. Bahçe, ““Hayırsever” Devletin Yükselişi: AKP Yönetiminde Gelir Dağılımı ve Yoksulluk”, in İlhan Uzgel and Bülent Duru (eds.), AKP Kitabı: Bir Dönüşümün Bilançosu (Ankara: Phonenix Kitabevi, 2009), p. 496. 464

Köse and Bahçe, 2009, p. 501.

144

4.3.1 Historical Background

Actually, the ILO and the World Bank eagerly recommended the

establishment of an individual-based and privatized pension system in the 1990s. As

it was mentioned before, Turkish government declared its plan about the introduction

of the IPS in its Letter of Intent to the IMF at the end of 2000. The planning of this

system was eagerly welcomed by some liberal scholars due to its likely impact on

financial markets.465 Moreover, the implementation of the legal and regulatory

framework to support supplementary individual pension scheme was connected to

the release of a World Bank loan within the framework of 17th

Stand-By Agreement

with the IMF. TÜSİAD also started to market a private individual pension system in

1996.

Indeed, the introduction of the IPS was planned before 2001. In this context,

three experts where two from the Treasury, A. H. Elveren and T. Teksöz, and one

from the SII, T. Güney, were sent to the United Kingdom (City University) to study

on private pension systems during 1996-1999. It was similar to the Chilean case.

When they returned to Turkey, A. H. Elveren was appointed as the Head of Private

Pensions Department and T. Teksöz as the Head of Social Security and Employment

Department of the Treasury. T. Güney was appointed as the Head of Department of

Finance and Actuary of the SII.

As the architects of the private pension system worked in many areas of the

pension transformation, T. Teksöz was charged as the president of SSI by the

approval of the SSI Law in May 2006. However, he resigned only after four months.

It was argued that although the Law defined the SSI as an autonomous institution,

there was a disagreement between the bureaucrats of the MLSS and the management

of SSI on this issue of autonomy. 466 Until 2011, the presidency of the SSI was

changed six times. As the budget of the SSI was the second largest one after the

general budget, so many changes in the presidency under successive JDP

governments reflected the conflict of interests between different governmental

465

Teksöz and Sayan, September-October 2002. 466

Erdal Sağlam, “SGK Başkanı Teksöz’ün İstifa Nedeni Özerklik”, Hürriyet (5 Eylül 2006).

145

bodies.467 In this period, T. Güney served as a president of the Institution in 2008 but

only for about three months. Moreover, the president was changed in 2013 again.

The fact that the two former presidents of the SSI were transferred to two

well-known international medicine and national health companies later indicate that

there was a close relation between the reformer bureaucrats and private sector.468

Moreover, the Head of Private Pension Department of the Treasury established a

consultancy company to advise private pension companies after leaving the Treasury

in 2007. Before this move, he had also participated in the Board of Directors of

Pension Monitoring Centre (PMC) for three years as a representative of the Treasury.

According to the Law No. 2531 of Works Banned from Being Performed by

Civil Servants Who Quit Public Duty469 requires that unless otherwise provided by

law, former civil servants are prohibited three years from the date of their retirement

or resignation from acting as broker, representative or consultant, directly or

indirectly, towards government agencies with regards to the activities falling within

the scope of their past duty. It is not known whether any legal action was launched

towards these people.470

Coming to the specific characteristics of the IPS, it was not constituted as a

mandatory pillar during the legislation period of 1999-2001 owing to the political,

economic and social conditions in Turkey under the coalition governments. It was

designed to supplement public pension pillar on a voluntary basis and to create a

saving model because the parametric reform would decrease the benefits of public

pensions.471

The introduction of the IPS in Turkey might be recognized as a crucial step in

the social security transformation. The rationale behind the system involves many

macroeconomic and microeconomic explanations as follows;

467

İsa Yazar, “80 Milyar Yeni Lirayı Yöneten SGK’ya Başkan Dayanmıyor”, Zaman (7 Ocak 2008); Osman Öztürk, “SGK Başkanı Yine Değişmiş”, Birgün (17 Ağustos 2011). 468

Ali Tezel, “Özel Sağlık Kuruluşlarının Danışmanı SGK Başkanları!”, HaberTürk (8 Eylül 2009). 469

Official Gazette (No. 17480, 06.10.1981). 470

Tezel, 2009. 471

Interview, 29 December 2011.

146

- to reduce burden of state-backed social security,

- to deepen capital markets by increasing number of institutional investors,

- to create long-term resources,

- to enable government to borrow long-term,

- to increase funds available to create new jobs,

- to regulate financial sector by declining fluctuations and speculations,

- to increase scope of the social security,

- to improve welfare level,

- to encourage savings through many incentives,

- to provide lump sum payment to those who do not wish to have an annuity.

Among these reasons, the most crucial one was the development and

deepening of capital markets and the creation of long-term funds.472 It was argued

that the IPS would create necessary funds for long-term infrastructure investment and

by this way it would increase employment level.473

Harvey claimed that capitalism requires something outside of itself in order to

accumulate474 and if markets do not exist particularly in the areas of education, social

security and health care, then they must be created by state intervention.475 In the

light of these arguments, the introduction of the IPS is a very good example of

market building by the hand of the state since the IPS provided a significant tax

advantage for its members. In other words, the state waived its tax revenue in order

to make the IPS attractive. It should be noted that the IPS was introduced in the wake

of the 2001 economic crisis as an exit way for financial markets. Moreover, the

opening of private pension market to the foreign companies was compatible with one

of the most important principles of the post-Washington Consensus, namely capital

account liberalization.

472

Doğan Cansızlar, “Bireysel Emeklilik Sistemi ve Sermaye Piyasaları”, TİSK İşveren Dergisi (Aralık 2001), Available at: www.tisk.org.tr; Ali H. Elveren, “Bireysel Emeklilik Sisteminin Makro Ekonomik Etkileri”, TİSK İşveren Dergisi (Mayıs 2003), Available at: www.tisk.org.tr. 473

Namık Dağalp, “Tasarrufların Bireysel Emeklilik Sistemine Yönelmesi, Kalkınma Açısından Çok Önemlidir”, TİSK İşveren Dergisi (Aralık 2001), Available at: www.tisk.org.tr. 474

Harvey, 2003, p. 141. 475

Harvey, 2006, p. 145.

147

4.3.2 How the IPS Works?

The IPS works on voluntary basis and aims to create additional income over

the pension provided by the public pension system. The pension rights are specified

on the basis of defined contribution system and the savings are tracked in individual

accounts which are safekept by a custodian (Takasbank) that was approved by the

Capital Markets Board of Turkey (CMB). Pension mutual funds are managed by

specialists of the portfolio management companies. The Treasury, the CMB,

Takasbank, the PMC, independent audit companies and internal audit departments

constitute the monitoring and supervision infrastructure of the system.

The PMC was established in July 2003. The Centre is responsible for

ensuring that the IPS operates in a safe, transparent and efficient manner by

providing data that will help the supervisory public authorities to take necessary

decisions and the people to take proper information. The shareholders of the Centre

are the Treasury and pension companies. It is assigned to perform daily electronic

monitoring and surveillance of the pension companies’ activities and reporting to the

public authorities. It consolidates data based on the daily transactions of such

companies, and stores the standardized data for all individual accounts while

generating statistical and actuarial information.476

The regulatory arrangements of the IPS are conducted by the Directorate

General of Insurance of the Treasury. The responsibilities of Directorate is to grant

licenses for pension operations, to conduct approval and amendment operations

about the technical bases of pension plans, to audit companies’ pension and

insurance operations ordinarily once a year, to lay down the bases and procedures of

regarding the qualifications of individual pension intermediaries and to determine the

bases and procedures about the issues that are laid down in the law related to the

share structure of pension companies.477

The system starts to work with the signing of the pension contract between

the participant and one of the pension companies. The collected contributions are

476

Emeklilik Gözetim Merkezi (EGM), Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2004), pp. 21, 25. 477

EGM, 2004, pp. 24-25.

148

invested in the pension mutual funds in accordance with the pension contract. The

participant decides the pension mutual fund type and amount in line with his/her risk

projections. Although the pension funds are managed by specialists, the system does

not provide any guarantee return to the participant. The participant has the right to

change the amount of contribution but it should not be less than the minimum

contribution level. If the participant stay in the pension plan at least one year, then

s/he may transfer the accumulation in the system to another pension company. In

order to get the pension right, a participant should pay 10 years of contribution and to

be aged 56 or more. A participant, who is granted with the pension, can also request

the accumulated fund as a lump payment or partial payment instead of a life pension.

The participants and employers who pay contribution for their employees to the IPS

were provided with tax incentive until 2012. The contributions of the participants

were tax deductible up to 10 per cent of income with a cap of annual minimum wage.

The contributions paid by the employer on behalf of employee were also tax

deductible subject to the same limits. The participant may leave the system before

becoming eligible for retirement. The only condition for early leave is to pay tax that

depends on participants’ contribution period and age.478

4.3.2.1 Fees and Charges

The members of the IPS are required to pay entrance and management fee

and fund management charge. These expenses should be explicitly indicated in the

pension contract and may be collected from the contributions or deducted over

pension fund assets:479

- Entrance Fee: It is paid for the opening of a new individual pension contract

and should be paid in one year time with a lump sum payment or payment by

installments. The pension company may not request an entrance fee. The

amount of entrance fee cannot exceed the half of monthly gross minimum

wage in force at the date of the contract.

478

Available at: http://www.egm.org.tr. 479

Available at: http://www.egm.org.tr.

149

- Management Fee: It may be deducted from participants’ contributions for the

operational costs. The management fee cannot exceed 8% of the

contributions.

- Fund Management Charge: It may be deducted over the net assets of the fund

on a daily basis with a cap of 0.01 per cent of the total net assets of the fund.

4.3.2.2 Tax Incentive (valid until 2013)

The participants of the IPS were provided with tax incentives at every stages

of the system such as contribution, investment and retirement until 2013. The

importance of tax advantage was very significant during the initiation and promotion

phase of the IPS. Therefore, in this section, firstly, tax incentive organization before

2013 is detailed and secondly, the current situation is given.

The Law of Amendments to Certain Tax Laws No. 4697480 laid down the

taxation regulations related to the IPS:481

- Contribution Phase: The participants’ contributions are tax deductible up to

10 per cent of their income with a cap of annual minimum wage. If the

employer pays the contribution for his/her salaried employee, then the

employer may directly write off the amount so paid as expenses up to 10 per

cent of the employee’s gross salary and provided that the amount paid in one

year does not exceed the total amount of the minimum wage in that year.

- Investment Phase: According to Article 8 of Corporate Tax Law No. 5520482

the income gained from pension mutual funds is exempt from corporate tax.

- Retirement Phase: Since the income gained from IPS is admitted as return on

stocks and bonds, it is subjected to stoppage in line with the Article 94 of

Income Tax Law No. 193.483 However, 25 per cent of accumulated funds are

480

Official Gazette (No. 24458, 10.07.2001). 481

PMC, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2005), pp. 22-24. 482

Official Gazette (No. 26205, 21.06.2006). 483

Official Gazette (No. 10700, 06.01.1961).

150

exempt from taxable income when a participant that is eligible to retire leaves

the system.484 Therefore, 75 per cent of accumulated fund in the individual

accounts is subjected to 5 per cent withholding tax rate. If a participant that is

not eligible to retire leaves the system, his/her all accumulated funds are

liable for 10 to 15 per cent tax depending on contribution period.

The legal proceedings also provide supremacy to pension mutual funds over

securities mutual funds. As explained above, no tax is withheld from the gains

secured by pension funds in the IPS. Only when a participant leaves the system, a

certain amount of income tax is applied but at different rates depending on how s/he

leaves the system. However, in accordance with the provisional Article 67 of the

Income Tax Law No. 193, the corporation tax exempt portfolio gains secured by

mutual fund or investment funds are subjected to 15 per cent withholding tax.485

4.3.2.3 2008 Global Financial Crisis and Changes in the IPS

Turkish government announced a comprehensive change in the IPS in

January 2008 under the impact of 2008 global financial crisis. The Regulation on

Amendments to the Regulation on Principles Governing Establishment and Activities

of Pension Mutual Funds”486 amended minimal requirements of portfolio

management contracts and portfolio limitations in funds management. Thus, it

eliminated the maximum limit on investments in foreign securities as well as the

minimum requirement to invest in government debt instruments. Put it differently,

the government’s first thing to do was to open the IPS more to the foreign markets in

the event of crisis.

The 2002 Regulation on IPS was replaced by the new Regulation487, which

provided amendments to the provisions of disclosure, entrance fee, minimum

484

Article 22 of Law No.193 was changed by the Law on Amendments to Certain Laws No. 4842 Official Gazette (No. 25088, 24.04.2003). 485

EGM, 2005, p. 23. 486

Official Gazette (No. 26754, 12.01.2008). 487

Regulation on Individual Pension System, Official Gazette (No. 26842, 09.04.2008).

151

contribution, fund distribution and pension scheme changes. The most significant

arrangement of the amendment was the establishment of withdrawal right in the

grace period. By this way, the participants were allowed the right to withdraw from

the contract within a 30-day grace period, even if a proposal form has already been

signed. It was also decided to re-pay entrance fees and contributions in case of

withdrawal to avoid any financial loss on the participant’s side. The new regulation

entered into force in the beginning of August 2008. The average enjoyment of the

right to withdraw in the grace period was 2.6 per cent for the last four months.488

The new regulation emphasized that participants should be informed of every

transaction being made from the entrance, since the crisis environment resulted in

market volatility. Moreover, it extended the information disclosure obligations to

allow participants to make conscious decisions. The regulation made a reduction in

the entrance fee in order to make the IPS attractive even during the crisis. In the older

arrangement, the maximum amount of entrance fee was equal to the gross minimum

monthly wage in force. However, new arrangement determined the maximum

amount as the half of the gross minimum monthly wage.

The level of monthly minimum contribution was determined as 5 per cent of

gross minimum monthly wage. It could be considered as an attempt to recover the

impact of withdrawals. According to the new regulation, distribution proportions

between funds or amounts of the accumulations and paid contributions could be

changed six times a year at most, and the pension scheme of a contract four times a

year at most.

In sum, the government took necessary actions to convince participants of the

IPS to stay in the system, even tried to created appealing provisions to attract new

entrants.

4.3.2.4 Change in Tax Incentive

The most appealing result of the IPS, in the first three years of operation, was

the percentage of opt-outs in terminated contracts. More than 90 per cent of

488

EGM, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2008), p. 80.

152

terminated contracts were resulted from opt-outs in 2005 and 2006.489 Therefore,

Millward Brown Research Company was contracted by the PMC to conduct a survey

about the reasons of withdrawals from the IPS. Within the scope of this survey, 1,506

people living in İstanbul, İzmit, Ankara, Bursa, İzmir, Antalya and Adana, who had

signed a pension contract and prematurely withdrew from the system during the first

quarter of 2007, were interviewed face to face. The survey reached to the following

conclusions:490

- The leading reasons for entering the IPS were: saving money (58 per cent),

extra income at retirement (49 per cent), investment instrument (33 per cent),

and providing security (25 per cent). As the participants were allowed to give

more than one answer, the totals exceeded 100 per cent.

- Even though 93 per cent of the sample was tax payers, only 20 per cent of

them benefited from the tax advantage, which was not sufficiently informed.

The tax advantage was a motive for joining the system for only 8 per cent of

the participants.

- Most important reasons for leaving the system were: personal reasons (58 per

cent), losing faith in the system (30 per cent), disfavour as an investment

instrument (21 per cent), displeasure about the pension company (16 per cent)

and finding retirement distant (15 per cent). Concerning personal reasons, 61

per cent of the participants chose to use the accumulated fund for another

expenditure; whereas, 53 per cent of participants withdrew their money

owing to decline in total income (severance, business setback and etc.).

According to a high-ranked bureaucrat from the Treasury491, people quitted

the IPS since the public pension system was still generous. In addition to this, he

linked the increase rate of opt-outs, by ignoring personal reasons that explained

above, to the problems concerning tax advantage because only one third of

consumers had benefited from tax incentive in 2011. Although the Cabinet had

489

EGM, 2005, p. 73; EGM, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2006), p. 70. 490

EGM, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2007), pp. 20-21. 491

Interview, 29 December 2011.

153

discretion to increase tax incentive up to 20 per cent, he argued that it was necessary

to enhance the efficiency of tax incentive mechanism since housewives and

pensioners were devoid of tax advantage, and many companies especially small and

medium sized enterprises did not reflect tax incentive to payrolls of employees. In

line with the results of the survey and the yearly experiences, the Treasury

considered the tax advantage as a missed opportunity.

The outcome of discussions concerning the IPS and tax incentive was

announced by Deputy Prime Minister Ali BABACAN on 17 April 2012.492 The

government principally aimed to make comprehensive changes in the IPS and to

initiate state contribution to the system instead of tax advantage. While the

government targeted to attract more people to the IPS, the existing participants would

also enjoy new arrangements.

Draft Law on Amendments to Individual Pension Savings and Investment

System, and to Certain Laws and Decrees No. 6327 was submitted to the National

Assembly on 24 May 2012 and approved on 13 June 2012. The significant changes

which were brought by the Law are summarized below:493

- The individual pension accounts will consist of two subsidiary accounts for

personal contributions and the state contribution. When a participant pays

contribution to his/her personal account, the PMC will be informed at the

same time. Then, the state contribution will be deposited to the other

subsidiary account. The state contribution will be 25 per cent. Therefore, the

contributions of participants will no longer be tax deductible.

- The tax policy for investment phase will not change. Thus, the income gained

from pension mutual funds and state contribution will not be subjected to

taxation.

- Regarding retirement phase, only earnings yield will be taxed apart from

principal amount.

- According to the new arrangement, the accumulated state contribution may

be withdrawn gradually. The accumulated amount cannot be retracted in the

492

Press Conference of Deputy Prime Minister Ali BABACAN and Minister of Finance Mehmet ŞİMŞEK on some legal arrangements concerning İstanbul Finance Centre, Supporting Entrepreneurship, Insurance Sector and Individual Pension System, 17 April 2012, Available at: www.hazine.gov.tr. 493

Official Gazette (No.28338, 29.06.2012).

154

first three years. 15 per cent of the state contribution will be withdrawn at the

end of the third year. While the part of 35 per cent will be withdrawn at the

sixth year, 60 per cent will be at the tenth year. However, the whole amount

will be withdrawn only at the retirement.

Even though the declared goal of the new arrangement was to provide

incentive for all participants that have not benefited from the tax advantage, the main

goal was to increase domestic savings by supporting the whole system with state

contribution. As the rate of state contribution was set big enough, it was explicit that,

the government even relied on the IPS to increase domestic savings.494 Moreover, the

government brought gradual withdrawal to keep savings in the system for a longer

time.

4.3.3 Ten Years Experience

Today, eighteen pension companies are making transactions in the IPS (Table

4). Eleven pension companies were granted with the license in 2003. The number of

pension companies did not change until 2008 but the structure of the IPS market

changed due to the mergers and acquisitions. Two pension companies in 2008, one

more in 2009, two more in 2011 and two more in 2012 and at last one more in 2013

were allowed to participate in the IPS. Furthermore, Asya Emeklilik ve Hayat A.Ş.,

which works on the basis of Islamic banking rules, was granted with license to make

transaction in the IPS market in 2012 in order to attract a different customer

portfolio.495 It is significant that while more than half of the companies belonged to

the national capital groups at the time of granting operating license in 2003, now

most of them are managed by international capital groups. Whereas the share of the

foreign capital in the production of premiums in the IPS market was 25 per cent in

2003, it reached to the level of 51 per cent in 2009. Its share in paid capital also

494

Noyan Doğan, “Hükümet Bireysel Emeklilikte Üzerine Düşeni Fazlasıyla Yaptı”, Hürriyet (19 Nisan 2012). 495

Interview, 29 December 2011.

155

Table 4. Individual Pension Companies

DATE of PENSION OPERATION LICENSE

NAME ACQUISITION (DATE) MERGER (DATE)

7 July 2003 Ak Emeklilik A.Ş.

Merger with Aviva Hayat ve Emeklilik A.Ş. under the

name AvivaSa Emeklilik ve Hayat A.Ş. (31 October

2007)

7 July 2003 Anadolu Hayat Emeklilik A.Ş.

7 July 2003 Garanti Emeklilik ve Hayat A.Ş.

7 July2003 Oyak Emeklilik A.Ş. ING Emeklilik A.Ş. (27 January 2009)

7 July 2003 Yapı Kredi Emeklilik A.Ş. Allianz Yaşam ve

Emeklilik A.Ş. (3 October 2013)

1 August 2003 Ankara Emeklilik A.Ş. Aegon Emeklilik ve

Hayat A.Ş. (26 September 2008)

1 August 2003 Başak Emeklilik A.Ş.

Başak Groupama Emeklilik A.Ş. (16 April

2007), Groupama Emeklilik A.Ş.

(30 September 2009)

1 August 2003 Koç Allianz Hayat ve Emeklilik

A.Ş.

Allianz Hayat ve Emeklilik A.Ş.

(7 October 2008)

1 August 2003 Vakıf Emeklilik A.Ş.

26August 2003 Commercial Union Hayat ve

Emeklilik A.Ş.

Aviva Hayat ve Emeklilik A.Ş.

(14 September 2004)

Merger with Ak Emeklilik A.Ş. under the name

AvivaSa Emeklilik ve Hayat A.Ş.

(31 October2007)

26 August 2003 Doğan Emeklilik A.Ş.

Fortis Emeklilik ve Hayat A.Ş.(21 November 2005),

BNP Paribas Cardif Emeklilik A.Ş. (18 July 2011)

11 April 2008 Finans Emeklilik ve Hayat A.Ş. Cigna Finans Emeklilik

Hayat A.Ş. (10 June 2013)

20 August 2008 Ergo İsviçre Emeklilik ve Hayat

A.Ş. Ergo Emeklilik ve Hayat

A.Ş. (26 April 2010)

11 May 2009 Deniz Emeklilik ve Hayat A.Ş. Metlife Emeklilik ve

Hayat A.Ş. (26 March 2012)

5 May 2011 Axa Hayat ve Emeklilik A.Ş.

24 January 2011 Ziraat Hayat ve Emeklilik A.Ş.

20 January 2012 Asya Emeklilik ve Hayat A.Ş.

20 January 2012 Halk Hayat ve Emeklilik A.Ş.

29 July 2013 Fiba Emeklilik ve Hayat A.Ş.

Source: Author’s table. (Derived from EGM, 2005, pp. 114-121; EGM, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2012), pp. 94-99)

156

reached to 55 per cent in 2009.496 All these figures reflected the increasing interest of

foreign companies in the Turkish IPS market. The sectoral changes are summarized

in Table 4.

4.3.3.1 The IPS by Numbers

The information in this section is gathered through 2003 Annual Report of

Insurance and Private Pension Activities in Turkey of the Treasury and the IPS

Progress Reports of the PMC for 2004-2013. Table 5 summarizes the figures of the

numbers of participants and contracts, the total net asset value of pension funds and

the total amount of expenses and entrance fees for the mentioned period.

The number of participants grew more than 100 per cent in the first three

years of the operation. The growth rate of participants started to decline in 2006 and

its average was 25 per cent during the period of 2006-2013. As some participants

have more than one contract, this results in a difference between the number of

participants and contracts. The gender breakdown of participants has been roughly

the same since the introduction of the system that it has more male participants than

female ones. The age group of 24-45 prefers the IPS most. The total net asset value

of the funds systematically increased only in the first three years of operation in

relation to the growth of number of participants. Although it reflected fluctuating

growth rate since 2007, the average was realized as 37 per cent. The total net asset

value of the funds reached to the level of TL 25 billion in 2013.

The most significant part of the Table 5 is considered to be the increasing

trend in the number of terminated contracts. The ratio of terminated contracts to the

written contracts peaked to 40 per cent in 2012. The most important reason for the

termination of contracts has been personal opt-outs. It is followed by transfer of

pension account to another pension company, cancellation by company, merging of

contracts, and termination due to death, disability and retirement. The ratio of opt-

outs to the terminated contracts was about 85 per cent for the last 5 years. During the

496

Şenay Gökbayrak, Refah Devletinin Dönüşümü ve Özel Emeklilik Programları (Ankara: Siyasal Kitabevi, 2010), p. 219.

157

Table 5. Individual Pension System (2003-2013)

In

div

idu

al

Pen

sion

Syst

em (

2003-2

013

)

20

13

18

4.1

53

.05

5

7.4

98

.82

1

4.6

87

.67

5

2.8

11

.14

6

2.4

15

.58

8

21

.92

1.8

60

.11

4

46

5.9

59.

87

6

21

.45

5.9

00

.23

8

25

.14

5.7

18

.41

8

24

18

8.2

21.

93

1

Sou

rce:

Auth

or’

s ta

ble

.

* T

he

figu

res

of

amou

nts

are

con

ver

ted

to

TL

by t

he

auth

or.

(A

s of

1 J

anuar

y 2

00

5 s

ix z

eroes

wer

e d

elet

ed f

rom

the

curr

ency

of

LIR

A)

**

Th

e st

atis

tics

bel

on

ged

to 1

4 p

ensi

on

co

mp

anie

s si

nce

Ax

a H

ayat

ve

Em

ekli

lik

A.Ş

. d

id n

ot

wri

tten

an

y c

on

trac

t as

of

20

11

yea

r-en

d.

***

Entr

ance

fee

is

coll

ecte

d a

par

t fr

om

con

trib

uti

on

s.

20

12

17

3.1

28

.13

0

5.8

35

.01

8

3.4

96

.37

7

2.3

38

.64

1

1.9

82

.32

4

16

.17

7.7

57

.75

5

43

6.7

20.

74

2

15

.74

1.0

37

.01

3

20

.34

6.2

90

.27

8

42

12

6.1

70.

51

8

20

11

15

**

2.6

41

.84

3

4.8

13

.61

9

2.9

39

.87

8

1.8

73

.74

1

1.6

02

.76

2

12

.39

3.6

88

.64

4

36

5.2

02.

92

2

12

.02

8.4

85

.72

2

14

.32

9.7

71

.98

6

19

10

7.8

40.

01

3

20

10

13

2.2

81

.47

8

4.0

03

.84

3

2.5

34

.84

0

1.4

69

.00

3

1.2

67

.14

1

9.5

15

.23

0.2

34

29

4.0

98.

78

7

9.2

21

.13

1.4

47

12

.01

1.9

86

.65

1

32

91

.86

5.8

36

20

09

13

1.9

87

.94

0

3.3

28

.41

4

2.2

03

.88

6

1.1

24

.52

8

94

8.6

40

7.1

02

.00

7.5

61

23

2.0

14.

87

0

6.8

69

.99

2.6

91

9.0

97

.43

6.4

67

43

76

.52

6.8

63

20

07

11

1.4

57

.70

4

2.0

29

.62

7

1.5

76

.27

3

45

3.3

54

40

6.3

84

3.9

17

.06

1.2

11

13

0.5

44.

12

3

3.7

86

.51

7.0

89

4.5

66

.38

3.3

16

62

50

.73

0.3

79

20

05

11

67

2.6

96

81

1.6

78

71

4.1

46

97

.53

2

93

.15

3

1.1

17

.23

3.8

26

38

.60

3.4

03

1.0

78

.63

0.4

23

1.2

16

.95

4.5

36

30

6

21

.76

8.9

63

,0

20

03

*

11

20

.35

1

20

.53

4

5.8

66

.76

4

5.6

92

.55

6

Pe

nsi

on

Co

mp

anie

s (#

)

Par

tici

pan

ts (

#)

Co

ntr

acts

(#)

(In

Fo

rce

+ Te

rmin

ated

)

In F

orc

e

Term

inat

ed

Op

t O

uts

Tota

l Am

ou

nt

Co

llect

ed

(TL

)

Exp

ense

s (T

L)

Tota

l Am

ou

nt

Dir

ecte

d t

o In

vest

men

t (T

L)

Am

ou

nt

of

Acc

um

ula

tio

n (

TL)

Gro

wth

of

Acc

um

ula

tio

n (

%)

Entr

ance

Fee

(TL)

***

158

2008 global financial crisis, 87 per cent of contracts were terminated due to the

voluntary opt-outs. As mentioned before, the fundamental purpose of personal opt-

outs was to spend accumulated fund for another necessity. Moreover, the pension

companies appropriated an average of 4.3 per cent of accumulated funds annually as

administrative expenses and entrance fees since the introduction of the IPS.

The data about regions for the contracts are gathered according to the

provinces where the participants reside. From the beginning of the system, the

distribution of contracts according to geographical regions demonstrated a similar

trend as follows: Marmara (45 per cent), Central Anatolia (15-16 per cent), Aegean

(15-16 per cent), Mediterranean (13 per cent), Black Sea (7 per cent), Southeast

Anatolia (3 per cent) and East Anatolia (2 per cent). Moreover, contracts with

participants living abroad belong to less than 5 per cent.

The data on the number of pensioners has been collected since September

2007. For the regulation set the age of retirement as 56 and the contribution period as

10 years, the first retirees comprised individuals who transferred their funds from

other insurance funds such as life and foundations. The data showed that some

people, who gained retirement right, preferred to stay in the system.

The state contribution was put into practice as of 1 January 2013. According

to the relevant Law, the percentage of entitlement to state contribution, based on the

period of time spent within the system, would be 15 per cent from 3-6 years, 35 per

cent from 6-10 years, 60 per cent for 10 years and over, and 100 per cent for

retirement, death and disability. As of 2013 year-end, the amount of state

contribution paid to pension contracts is TL 1,369,932,116. The state paid

contribution average TL 410 per contract and TL 489 per participant.

The participants’ fund preferences and their average returns are given in the

Table 6. Almost half of the funds were invested in government bonds and bills in

local currency. It is followed by flexible fund group, liquid fund group and stocks.

The return on government bonds and bills started to decline in 2010, even it was

negative in 2013. Although the government anticipated more investment in stocks

fund to create financial deepening497, its share has been limited to at most 7 per cent

since the introduction of the system. This outcome could be explained by the figures

497

Interview, 29 December 2011.

159

of annual return that they have been very fluctuating. It is significant that the share of

government bonds and bills decreased sharply in 2013 by 23 per cent. It reflected the

participants’ preferences towards flexible funds.

Table 6. Total Average Returns* of Individual Pension Funds (%)

2004 23.94

2005 19.56

2006 11.07

2007 18.40

2008 9.51

2009 21.57

2010 9.20

2011 -0.99

2012 17.03

2013 -0.76

Source: Author’s table.

* Returns Weighted through Daily Net Asset Values

The IPS had more similar annual return results until the 2008 crisis. The

value of the pension funds decreased about 94 per cent during the crisis. The system

started to give unpredictable annual results after 2008. The negative outcomes in

2011 and 2013 were basically produced by the losses in stocks fund.

4.3.3.2 The Role of the IPS in Turkish Financial Sector

Turkish financial sector is characterized with a strong share of the banking

sector. According to Table 7, the banking sector including Central Bank of the

Republic of Turkey (CBRT) constituted around 71 per cent of the financial sector

assets as of 2011. Pension mutual funds were 0.74 per cent of the total asset size

while it was 0.4 per cent in 2007.

160

Table 7. Total Asset Size of Turkish Financial Sector

(TL billion) 2007 2008 2009 2010 2011 2012/09

CBRT 106,6 113,5 110,0 128,5 146,2 188,6

Banks 581,6 732,5 834,0 1006,0 1217,6 1308,5

İstanbul Stock Exchange 335,9 182,0 350,8 472,6 381,2 507,6

Insurance, Reins., Pension Co. 22,1 27,9 33,4 36,7 41,5 47,4

Pension Mutual Funds 4,6 6,0 9,1 12,0 14,1 18,4

Securities Mutual Funds 26,4 24,0 29,6 33,2 32,2 29,7

Leasing Companies 13,7 17,1 14,6 15,7 18,6 19,8

Factoring Companies 7,4 7,8 10,4 14,5 15,7 16,3

Consumer Finance Co. 3,9 4,7 4,5 6,0 8,9 10,6

Securities Intermediary Ins. 3,8 4,2 5,2 7,5 9,6 n.a

Real Estate Invest. Ass. 4,1 4,3 4,7 17,2 18,7 n.a

Securities Investment Ass. 0,7 0,6 0,7 0,8 0,7 0,7

Real Estate Management Co. 0,2 0,4 0,4 0,7 0,9 1,0

Portfolio Management Co. 0,2 0,3 0,3 0,3 0,3 n.a.

Financial Holdings Co. 3,8 5,0 4,9 5,1 5,5 n.a.

Credit Guarantee Fund 0,1 0,1 0,1 0,2 n.a.

Enterprise Capital Man. Co. 0,2 0,1 0,2 0,2 0,6 n.a.

TOTAL 1115,2 1130,5 1412,9 1757,1 1912,5 2148,6

Source: Banking Regulation and Supervisory Agency (BRSA), Financial Markets Report (Ankara:

BRSA, December 2011), p.52; BRSA, June 2012, p. 18.

Although the IPS was formed to complement the public pension scheme, it

serves particularly to middle-income and higher-income people who can make

additional saving. The ratio of personal opt-outs helps further qualify this argument

by demonstrating that the IPS primarily basically assists middle-income earners’

savings. In sum, the current form of the IPS is an instrument for middle-income

classes to save money which are systematically used by financial markets. Without a

radical transformation it seems hard for the low-earning labouring classes to take part

in the IPS.

161

4.4 Conclusion

Neoliberal transformation of Turkey by the authoritarian hand of military

regime following the coup in 1980 had a devastating impact on organized labour and

social security rights. The flexible labour market provisions and limited social

security rights imposed in the name of individual freedoms, efficiency and

sustainability have had a vital role in suppressing the organized labour and achieving

neoliberal economic order.

The pension transformation was justified by the arguments such as generous

retirement payments, the low level of coverage and financial sustainability. However,

the finance structure of pension system indeed deteriorated owing to the nonpayment

of social security premiums by the employers and the misuse of social security funds.

In other words, the employers in private sectors preferred to make benefit in the

financial markets due to high interest rates rather than paying social security

premiums for their employees. Unsurprisingly, the penalties for nonpayment of

premiums were abolished by many legal arrangements in favour of capital.

Moreover, the accumulated funds were firstly used for the financing of state-

enterprises, secondly of exports. The privatization of state-enterprises led to the

evaporation of funds in the hands of the private sector. The informal employment

had also a negative effect on the PAYGO system as it is directly related with the

level of employment. The sub-contracting working system increased the number of

people without any secure pension rights. In sum, the fundamental goal was not to

create a comprehensive pension policy, as it was impossible under flexible labour

market conditions and with limited state contribution, but to open pension savings to

the use of financial markets.

The IFIs have had a direct involvement in the transformation of the Turkish

pension transformation by their conditional loans as they did in other countries of the

South. The repetitious economic and financial crises, as a result of neoliberal policies

and financialization, have created a suitable environment for the IFIs to force pension

transformation. Likewise, the EU forced pension reform as a condition of accession

negotiations. The leading Turkish capital groups, who internalized the position of the

162

IFIs, eagerly recommended pension transformation as a solution to financial

sustainability of the pension system.

Although the Chilean experience was praised by the neoliberal coalition also

in the case of Turkey, a radical pension privatization could not be realized as it was

difficult to legitimize it. The IPS was implemented as a complementary pillar to

public pensions and was based on voluntary contributions. The JDP government has

preferred to redefine health and pension policies in a way to decrease the power of

civil and military bureaucracy and subordinate all middle- and lower-income groups

to the neoliberal order. This has been accompanied by the transformation of formal

social policies into charity-based redistributions by using Islamic values as a

compelling instrument.

The IPS was introduced in the wake of the 2001 economic crisis. It has

constituted a very suitable example of market building in the pension area by the

hand of state. The foreign pension companies were granted with a license to operate

in Turkish private pension market within the framework of capital account

liberalization, one of the most important principles of the post-Washington

Consensus. Today, more than half of the paid capital in the IPS belonged to foreign

companies. In addition, the government took necessary steps to keep the system alive

during the 2008 global financial crisis. Furthermore, a considerable amount of state

contribution was initiated in 2013 to make the system more attractive. Even though

the government has tried to justify the implementation of the IPS by the decline in

the amount of public pensions, its sphere of influence was limited to a group of

middle-income class who can make additional saving. However, it has helped the

provision of supplementary funds to financial markets. The potential of the Turkish

private pension market and average returns on individual pension funds attracted

international capital that was expected by pro-reformers to deepen the financial

markets.

163

CHAPTER 5

CONCLUSION

Pension systems in the countries of the South have undergone a significant

transformation since the 1980s in parallel to the neoliberal turn in the world. Even

though the conventional literature has defined the forced change in the pension

systems as reform, its content indicates a more fundamental transformation in the

very organization of the pension understanding. The logic behind the pension reform

has arguably been to reduce the role of state, to individualize risk and to eliminate

the intergenerational solidarity in accordance with the neoliberal understanding,

while the role of the state has continued to be crucial for the sustainability of the

system though now through redistributions in favour of capital. Two important

achievements of the neoliberal pension reforms from the perspective of capital have

been the redefinition of the pension issue from a political question to age-based

technical on the one hand, and the opening up of the pension “sector” to capital

accumulation through its commodification.

This thesis has first questioned the validity of David Harvey’s and Andrew

Gamble’s arguments on neoliberalism in relation to the pension transformation in the

countries of the South in general. Then, the cases of Chile and Turkey have been

examined. As Chile was the first neoliberal state experiment, its pension privatization

experience had been very important for the other countries in the South both as a

model and an anti-model. In other words, while the Chilean pension privatization

was marketed by the IFIs as a successful model for the other countries of the South

during the 1990s, in time the Chilean pension system has become an undesirable

model owing to its negative social and economic impacts on the society. The Turkish

case was detailed in the thesis in order to highlight that even though a similar pension

system reform was imposed by the IFIs on Turkey, the international conjuncture as

well as domestic class configurations in Turkey in the 1990s have been different

from those that had shaped the Chilean reform process that the consequences of the

164

reforms have ultimately been different in the two countries; thus, the process is a

historically contingent process shaped by class struggles and political dynamics at

both domestic and global levels.

While underlining the constitutive role of class struggles in neoliberal

transformations, David Harvey has underlined the persistent character of primitive

accumulation by redefining it as “accumulation by dispossession” in the neoliberal

era. While Marx associated primitive accumulation by the enclosure of commons

such as land, water, mines and commodification of labour power, Harvey has used

accumulation by dispossession to explain the features of contemporary capitalism

such as stock promotions, speculative raiding by hedge funds and dispossession of

assets by manipulations. In line with Harvey’s analyses, one of the most important

features of contemporary capitalism has been the privatization of pension systems

and the raiding of pension funds by stock collapses.

Harvey has also argued that neoliberalism is a class project to achieve the

restoration of class power. Both Harvey and Gamble have emphasized the role of

state in the implementation of this neoliberal project, which is based on the

contradictory assumptions that the state should retreat from the economic sphere

while at the same time be strong enough to remove the obstacles in front of capital

accumulation. In this way, the state is expected to prevent the opposition of social

forces to pension privatization by authoritarian measures. Even though neoliberal

policies have been marketed by ideas of individual freedoms and freedom of choice,

in reality, they have been implemented through authoritarian measures of the states

since any threat to market fundamentalism should be either weakened or abolished.

Through such a restructuring of the states, neoliberalism has attacked full

employment policies, state-backed welfare provisions and trade unionism.

The IFIs, especially the World Bank, have become the supervisors of the

pension reform in the countries of the South in exchange of conditional loans. In

addition to the IFIs, regional development banks have financed pension

transformation in these countries. The neoliberal approach has tried to justify the

forced reform process with the sustainability of pension systems in relation to the

population ageing while population ageing is indeed one of the most important

demographic problems of the countries of the North, but not the ones in the South.

165

This thesis used Gamble’s argument to clarify this phenomenon by arguing that it has

been easy to force neoliberal policies in the South where there are no established

bourgeois democratic institutionalization guaranteed by political and civil rights to

help oppose these policies.

Although the reform process has promised reducing state’s role and fiscal

costs, increasing the coverage of pension systems, boosting competition in the

pension market, these goals could not be achieved. Instead, the pension

transformation in the countries of the South has created a new market for financial

speculation which has resulted in the vaporization of people’s future in the hands of

financial market players. Pension transformation and labour market flexibilization

have gone hand in hand in the countries of the South due to the fact that traditional

pension systems are based on full employment policies. Ultimately, neoliberal

welfare policies have left people to their own fate. Contrary to the neoliberal

arguments, pension transformation has given the state a crucial role: to save the

private pension systems and private pension companies in case of bankruptcy and to

provide minimum pension guarantee to people just to manage but not to combat

poverty.

The chapter on neoliberalism, pension reform and private pension accounts

has provided an overview of the evolution of the pension systems and the neoliberal

arrangement of pension systems in the countries of the South within the framework

of the principles of Washington and post-Washington Consensus. The historical

development of social security and pension rights has showed that all these rights had

been acquired through class struggles. The organized labour and the established state

role constituted the basic features of the post-war welfare settlement. The ILO of

whose principles have been based on tripartite consensus used to be the main

policymaker in pension issues before the neoliberal turn. The World Bank, the

promoter of neoliberal ideas, has acquired a dominant position in the pension issue

after the 1980s in line with the Washington Consensus principles. Although the ILO

has had a different view from the World Bank at the beginning of pension reform

debate, the thesis has demonstrated that their arguments have converged in the recent

years. Now, both organizations are in favour of multipillar pension systems that are

composed of public and private pillars.

166

The implementation of Washington Consensus principles and their inevitable

outcomes such as fast financial liberalization and speculative financial movements

yielded to unsustainable foreign debt, economic and social collapse in the countries

of the South. While the main reforming principles were revised and named as post-

Washington Consensus in the 1990s, capital account liberalization, labour market

flexibilization, social safety nets and targeted poverty reduction have become the

most appealing items of new agenda. As neoliberal policies have resulted in the

increase of the level of unemployment and poverty all over the world, the post-

Washington Consensus has faced the necessity to tackle with this issue and hence

shifted the pension debate into targeted poverty reduction strategies and social safety

nets. This has been an attempt to manage political consequences of poverty as well as

an attempt to provide healthy labour force and population for both capitalist

production and consumption.

The 2008 global financial crisis has exacerbated the debate on the pension

reform. The crisis environment and volatility in the financial markets have caused

substantial losses in the private pension funds. The countries of the South were

provided by financial assistance by the IFIs and brought into conditional loan cycle

again to recover the crisis effect. Unsurprisingly, the accumulated pension funds

were used to save the investments of capitalists that would go bankrupt. The crisis

has confirmed that there would be no step back in the pension transformation in the

South since these countries have been forced to maintain their private pension

systems even in the crisis environment. Only Hungary and Argentina have de facto

nationalized private pension accounts because the latter were not sustainable in any

case.

The chapter on Chile manifested that the pension privatization in Chile was

one of the best examples of the neoliberal class project. The military coup, which

was directed by General Pinochet, substantially changed state-society relations

drastically. The Chicago Boys, who were educated in the United States and inspired

by the views of Friedrich A. Hayek and Milton Friedman, institutionalized neoliberal

principles in all aspects of life in Chile. The radical pension privatization process was

one of the important cornerstones of neoliberal state formation that had primarily

dissolved the power of organized labour in Chile. The pension system was radically

167

privatized with the argument of providing individuals freedom of choice ironically

by the authoritarian rule of the state. The pension privatization was used to restore

the power of ruling classes in Chile. The international coalition, which was

composed of the IFIs, regional banks and liberal scholars, have enthusiastically

promoted Chilean model during the 1990s as a solution to the countries of the South

whose pension systems were deemed to be unsustainable in the near future.

Instead of increasing the financial sustainability of the system and the value

of pensions, or boosting competition in the private pension market, the new pension

system led to increased numbers of poor people, and benefited ultimately to pension

fund administrators, capital market players and their international affiliates as well as

high-paid and full time workers. The concentration in the private pension market and

the linkages between private pension companies and ruling elites made the class

project explicit. Moreover, the preservation of neoliberal policies even by the centre-

left coalitions confirmed that a radical reform of that scale is hard to be repealed due

to the instabilities they would lead to in the Chilean society and power balances. The

best the centre-left coalition governments have achieved was to add a solidarity pillar

in order to sustain the poor in the labour market within the framework of post-

Washington Consensus and in the name of inclusive neoliberalism.

The chapter on Turkey has showed that neoliberal policies are not recognized

automatically and similarly in all countries of the South. For the state is not an

automatic facilitator of capital’s functional needs as Clarke argued. The Turkish

neoliberal transformation was launched by a military coup like the one in Chile and

likewise the military regime and its descendants in civil form have adhered to the

neoliberal economic and social policies. The labour market has been flexibilized in

order to make the economy competitive in the international arena in relation to the

export-led strategies. Actually, export-led strategies and their requirements such as

flexible labour market were put forwarded as a discursive justification. The

underlying reason behind the transformation of labour market policies was to revoke

civil and political rights of labour which were entitled before. Thus, the unionization

has been seen as a big problem that should be tackled with in order to reduce labour

market distortions. In this context, labour market flexibilization and pension

transformation have been realized simultaneously like in the other countries of the

168

South through a common discourse based on aging, sustainability and efficiency.

This does not mean that the forced pension reform in Turkey was a project to restore

the power of ruling classes. Unlike in Chile, Turkish ruling elites restored their

power before the 1970s economic crisis. Moreover, Turkish pension transformation

was postponed to the 1990s due to the lack of conditionalities of the IFIs in the

1980s. Hence, it could be considered that the pension transformation and the hostile

policies that targeted the labour rights served to the consolidation of class power in

Turkey.

Turkey had never had a Keynesian welfare state and a pension system on the

basis of universalism, adequacy and equality even before the neoliberal turn. Rather

the employment status has basically determined the pension rights of people. The

dependents, which formed the biggest part of the population that was covered by

social security, have been entitled pension and health rights via their family

members. The PAYGO pension system started to have deficit at the beginning of the

1990s. While liberal scholars and national capital groups criticized the system as

being generous in providing retirement benefits and called for pension reform, the

most important actual reason was the nonpayment of social security premiums by

employers in private sectors in order to invest such resources in financial markets in

relation to high interest rates. The existence of higher levels of financial profits led

Turkish capital groups to not to make new productive investments. The decreasing

rate of investments and the flexibilization of labour market increased the number of

people without a job and formal social security rights. As PAYGO system was

strictly dependent on employment level and proper collection of premiums, the

nonpayment of premiums and increasing rate of unemployment dragged the pension

system into the crisis. The lack of state contribution to the pension system intensified

the problem. As a result, the pension reform became one of the most appealing items

of economic agenda of the governments in Turkey. This phenomenon could not be

thought apart from international neoliberal agenda.

The IFIs have been highly involved in the pension transformation process by

their conditional loans. The European Union has also become an important anchor in

this process since Turkey was defined as an accession country. The leading Turkish

capital groups have eagerly encouraged pension transformation by appreciating the

169

Chilean example. Technocrats from Undersecretariat of Treasury and Social

Insurance Institution were sent to the United Kingdom to be educated in the area of

private pension systems. Similar to the Chilean case, Turkish technocrats were

educated in abroad and turned their country to serve for pension transformation and

to establish a private pension system. However, a radical pension privatization could

not be realized in Turkey as it has been difficult to legitimize due to the specific

political at the time of the reform. The Individual Pension System has hence

implemented in Turkey as a complimentary pillar to public pensions and constituted

a very suitable example of market building in a protected area of pensions by the

hand of state. The private pension market has been pervaded by international

companies in compatibility with the capital account liberalization principle of the

post-Washington Consensus.

1999 and 2006-2008 reform processes brought parametric changes in the

Turkish pension system. The common points of the two reform processes were to

increase retirement ages, to decrease the amount of pensions and to remove different

pension applications among three social insurance institutions. In other words, while

the forced reform claimed to increase the coverage of the pension system and to

solve the problems of pension insecurity, the politicians consciously focused on

technical matters such as retirement age and replacement rate in order to redefine the

pension issue as a technical question rather than a political one. Unsurprisingly, the

reform process did not make a significant increase in the level of coverage due to

flexible labour market rules. In fact, it decreased the scope of benefits and the

welfare of the poorer strata.

The pension system in Chile now operates on the basis of fully-funded private

pension accounts. However, Turkish pension system still has a strong public

component since the private pension accounts were established as a complementary

instrument to public pensions. The opt-out rates demonstrated that the private

pension system in Turkey has been mostly used as an instrument of saving not a

supplementary pension pillar.

Pension and health policies have become a useful class project tool especially

in the hands of Justice and Development Party governments in reducing the power of

the civil and military bureaucracy which the JDP considers as opponents to its rule.

170

Besides, the formal social policies including the pensions have been transformed into

charity-based redistribution by using Islamic values.

The Chilean and Turkish pension reform processes covered in this thesis have

thus constituted good but different examples to analyse the pension systems in the

countries of the South, which have been under the attack of neoliberalism since the

1980s. While the pension issue has been considered as an important political

question before the 1980s, it has become a technical question in the context of

population ageing by the implementation of neoliberal policies. Traditional pension

systems have been criticized of being ineffective and financially unsustainable.

However, the proposed neoliberal solutions have become ultimately the real causes

of the pension crisis while the global campaign on the pension reform has aimed to

dispossess people’s pension rights and to open this protected area to capital

accumulation. The global pension reform agenda has excluded the fundamental

objectives of pension systems such as universalism, equality, intergenerational

solidarity and fight against poverty; instead, it has individualized risks and increased

the income inequality.

171

REFERENCES

Adalet ve Kalkınma Partisi, Kalkınma ve Demokratikleşme Programı (Ankara: AKP,

2002).

Adalet ve Kalkınma Partisi, Türkiye Hazır Hedef 2023, 12 Haziran 2011 Genel

Seçimleri Beyannamesi, Available at:

http://www.akpartiorg.tr/upload/documents/beyanname.2011.pdf.

Akı, Erol and Demirbilek, Sevda, “An Analysis of Finance Problems of Social

Insurance Institution in Turkey”, D.E.Ü.İ.İ.B.F. Dergisi (Cilt: 17, Sayı: 1, 2002), pp.

1-10.

Akyüz, Yılmaz, The Political Economy of Turkey (London: Pluto Press, 2005).

Alper, Emin, “Emeklilik Reformları: Dünya Bankası, Avrupa Birliği ve Türkiye”,

Boğaziçi Üniversitesi Sosyal Politika Forumu, Araştırma Raporu (İstanbul, 2004),

Available at:

http:// www.spf.boun.edu.tr/docs/discussionpaper3.pdf.

Alper, Yusuf, “Sosyal Güvenlik Reformu ve Finansmanla ilgili Beklentiler”, Sosyal

Güvenlik Dergisi (Cilt: 1, Sayı: 1, Haziran 2011), pp. 7-47.

Amin, Samir, “The Implosion of Global Capitalism: The Challenge for the Radical

Left”, Paper Presented at the Workshop Trade Unions, Free Trade and the Problem

of Transnational Solidarity (UK: Nottingham University, 2-3, December 2011), pp.

1-31.

Antolin, Pablo and Stewart, Fiona, “Private Pensions and Policy Responses to the

Financial and Economic Crisis”, OECD Working Papers on Insurance and Private

Pensions (Working Paper No. 36, April 2009), pp. 1-35.

Arın, Tülay, “The Poverty of Social Security: The Welfare Regime in Turkey”, in

Neşecan Balkan and Sungur Savran (eds.), The Ravages of Neoliberalism: Economy,

Society and Gender in Turkey (New York: Nova Science Publishers, 2002), pp. 73-

91

172

Atasoy, Yıldız, Islam’s Marriage with Neo-Liberalism: State Transformation in

Turkey (New York: Palgrave Macmillan, 2009).

Aydın, Ufuk, “Sosyal Güvenlikte Özelleştirme Sebepler ve Uygulamalar”, Çimento

İşveren Dergisi (Cilt: 5, Sayı: 12, 1998), pp. 4-17.

Bağımsız Sosyal Bilimciler, “Güçlü Ekonomiye Geçiş Programı Üzerine

Değerlendirmeler”, Mülkiye Dergisi (Cilt: XXV, Sayı. 229, Ağustos 2001), pp. 11-

70.

__________, “2003 Başında Türkiye Ekonomisi ve AKP’nin Hükümet Programı

Üzerine Değerlendirmeler”, Available at: www.bagimsizsosyalbilimciler.org.

__________, 2005 Başında Türkiye’nin Ekonomik ve Siyasal Yaşamı Üzerine

Değerlendirmeler (Ankara, Mart 2005), Available at:

www.bagimsizsosyalbilimciler.org.

__________, IMF Gözetiminde On Uzun Yıl 1998-2008: Farklı Hükümetler, Tek

Siyaset (Ankara, Haziran 2006), Available at: www.bagimsizsosyalbilimciler.org.

Barr, Nicholas, “Reforming Pensions: Myths, Truths, and Policy Choices”, IMF

Working Paper (Working Paper No. 139, August 2000), pp. 1-56.

Beattie, Roger A., “Review of World Bank (1994)”, International Labour Review

(Vol. 133, No. 5-6, 1994), pp. 714-719.

Bedirhanoğlu, Pınar and Yalman, Galip L., “Neoliberal Küreselleşme Sürecinde

Türkiye’de Yerel Sermaye: Gaziantep, Denizli ve Eskişehir’den İzlenimler”, Praksis

(No. 19, 2009), pp. 241-266.

Bevlavy, Miroslav, “Why Has the Crisis Been Bad for Private Pensions, But Good

for the Flat Tax? The Sustainability of ‘Neoliberal’ Reforms in the New EU

Members”, CEPS Working Document (No. 356, 2001), pp. 1-20.

Blackburn, Robin, Banking on Death: Or, Investing in Life: The History and Future

of Pensions (London, New York: Verso, 2002).

173

Bonnet, Florence, Ehmke, Ellen and Hagemejer, Krzysztof, “Social Security in

Times of Crisis”, International Social Security Review (Vol. 63, No. 2, 2010), pp.

47-70.

Bonoli, Giuliano, George, Vic and Taylor-Gooby, Peter, European Welfare Futures:

Towards a Theory of Retrenchment (Cambridge: Polity Press, 2000).

Boratav, Korkut, 1980’li Yıllarda Türkiye’de Sosyal Sınıflar ve Bölüşüm (Ankara:

İmge Kitabevi, 2005).

Boratav, Korkut, Yeldan, Erinç and Köse, Ahmet H., “Globalization, Distribution

and Social Policy: Turkey, 1980-1998”, CEPA Working Paper Series I (No. 20,

2000), pp. 1-35.

Boratav, Korkut and Özuğurlu, Metin, “Social Policies and Distributional Dynamics

in Turkey: 1923-2002”, in Massoud Karshenas and Valentine Moghadam (eds.),

Social Policy in the Middle East: Economic, Political and Gender Dynamics (New

York: Palgrave Macmillan, 2006), pp. 156-189.

Borzutzky, Silvia, “From Chicago to Santiago: Neoliberalism and Social Security

Privatization in Chile”, Governance: An International Journal of Policy,

Administration, and Institutions (Vol. 18, No. 4, October 2005), pp. 655-674.

__________, “Reforming the Reform: Attempting Social Solidarity and Equity in

Chile’s Privatized Social Security System”, Journal of Policy Practice (Vol. 11,

2012), pp. 77-91

__________, “Pension Market Failure in Chile: Foundations, Analysis and Policy

Reforms”, Journal of Comparative Social Welfare (Vol. 28, No. 2, 2012a), pp. 103-

112.

Briggs, Asa, “The Welfare State in Historical Perspective”, in Christopher Pierson

and Francis G. Castles (eds.), The Welfare State Reader (Cambridge: Polity Press,

2006), pp. 16-29.

Browning, Edgar K. “Social Insurance and Intergenerational Transfers”, Journal of

Law and Economics (Vol. 16, No. 2, October 1973), pp. 215-237.

174

Brussels European Council, “Presidency Conclusions” (16-17 December 2004),

Available at:

http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/83201.pdf.

Buchanan, James M., “Social Insurance in a Growing Economy: A Proposal for

Radical Reform”, National Tax Journal (Vol. 21, No. 4, 1968), pp. 386-395.

Buğra, Ayşe, “Labour, Capital, and Religion: Harmony and Conflict among the

Constituency of Political Islam in Turkey”, Middle Eastern Studies (Vol. 38, No. 2,

April 2002), pp. 187-204.

Buğra, Ayşe and Keyder, Çağlar, New Poverty and the Changing Welfare Regime of

Turkey (Ankara: UNDP, 2003).

__________, “The Turkish Welfare Regime in Transformation”, Journal of

European Social Policy (Vol. 16, No. 3, 2006), pp. 211-228.

Cam, Sürhan, “Neo-Liberalism and Labour within the Context of an ‘Emerging

Market’ Economy-Turkey”, Capital & Class (Vol. 26, Issue. 77, 2002), pp. 89-114.

Cansızlar, Doğan, “Bireysel Emeklilik Sistemi ve Sermaye Piyasaları”, TİSK İşveren

Dergisi (Aralık 2001), Available at: www.tisk.org.tr.

Charlton, Roger and McKinnon, Roddy, “Beyond Mandatory Privatization: Pensions

Policy Options for Developing Countries”, Journal of International Development

(Vol. 12, Issue 4, 2000), pp. 483-494.

Chin, Tom Y., “The Beveridge Report and the Development of British Social

Security”, Journal of Social Science and Philosophy (Vol. 81, No. 11, 1992), pp.

321-382.

Cichon, Michael, “Notional Defined-Contribution Schemes: Old Wine in New

Bottles?”, International Social Security Review (Vol. 52, No. 4, 1999), pp. 87-105.

Clarke, Simon, “State, Class Struggle, and the Reproduction of Capital”, in Simon

Clarke (ed.), The State Debate (London: Macmillan, 1991), pp. 183-203.

175

___________, “The Global Accumulation of Capital and the Periodization of the

Capitalist State Form”, in Werner Bonefeld, Richard Gunn and Kosmas Psychopedis

(eds.), Open Marxism, Vol. 1: Dialectics and History (London: Pluto Press, 1992),

pp. 133-150.

Constitutional Court Decision, 2001/41, 23 February 2001, Official Gazette (No.

24592, 23.11.2001).

Constitutional Court Decision, 2006/36, 15 December 2006, Official Gazette (No.

26388, 26.12.2006).

Coomber, Ross, “Book Review” (The Free Economy and the Strong State: The

Politics of Thatcherism, by A. Gamble), The Sociological Review (Vol. 37, Issue 3,

August 1999), pp. 566-568.

Copenhagen European Council, “Presidency Conclusions” (21-22 June 1993),

Available at:

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/72921.pdf.

Coşar, Simten and Yeğenoğlu, Metin, “The Neoliberal Restructuring of Turkey’s

Social Security System”, Monthly Review (April 2009), pp. 36-49.

Council Decision of March 8, 2001, 2001/235/EC, Official Journal of the European

Union (2001/L 85/13).

Council Decision of May 19, 2003, 2003/398/EC, Official Journal of the European

Union (2003/L 145/40).

Council Decision of January 23, 2006, 2006/35/EC, Official Journal of the European

Union (2006/L 22/34).

Council Decision of February 18, 2008, 2008/157/EC, Official Journal of the

European Union (2008/L 051/4).

Council Regulation No 2500/2001 of 17 December 2001 Concerning Pre-Accession

Financial Assistance and Amending Regulations No 3906/89, No 1267/1999, No

1268/1999, No 555/2000.

176

Çarkoğlu, Ali, “Turkey’s November 2002 Elections: A New Beginning?”, Middle

East Review of International Affairs (Vol. 6,No. 4, December 2002), pp. 30-41.

Çelik, Aziz, “Sosyal Güvenlik Taarruzunda Mola”, Birikim Dergisi (Sayı: 213, Ocak

2007).

Dağalp, Namık, “Tasarrufların Bireysel Emeklilik Sistemine Yönelmesi, Kalkınma

Açısından Çok Önemlidir”, TİSK İşveren Dergisi (Aralık 2001), Available at:

www.tisk.org.tr.

Dereli, Toker, “The Impact of Privatization on Industrial Relations in Turkey”, in

Prof. Dr. Nusret Ekin’e Armağan (Ankara: TÜHİS, Yayın No: 38, 2000), pp. 439-

450.

Doğan, Noyan, “Hükümet Bireysel Emeklilikte Üzerine Düşeni Fazlasıyla Yaptı”,

Hürriyet (19 Nisan 2012).

Drazen, Allan and Grilli, Vittorio, “The Benefit of Crises for Economic Reforms”,

The American Economic Review (Vol. 83, No. 3, June 1993), pp. 598-607.

Drucker, Peter F., The Unseen Revolution: How Pension Fund Socialism Came to

America (New York: Harper & Row, 1976).

Dumenil, Gérard and Levy, Dominique, “Neo-Liberal Dynamics: A New Phase”, in

Kees van der Pijl, Libby Assassi and Duncan Wigan (eds.), Global Regulation:

Managing Crises after the Imperial Turn (New York: Palgrave Macmillan, 2004),

pp. 28-42.

Ebbinghaus, Bernhard, “Introduction: Studying Pension Privatization in Europe”, in

Bernhard Ebbinghaus (ed.), The Varieties of Pension Governance: Pension

Privatization in Europe (Oxford: Oxford University Press, 2011), pp. 3-21.

Economic Commission for Latin America and the Caribbean, Shaping the Future of

Social Protection: Access, Financing and Solidarity, Thirty First Session of ECLAC,

Montevideo, Uruguay (Santiago: United Nations, 2006).

Edwards, Sebastian, “The Chilean Pension Reform: A Pioneering Program”, in

Martin Feldstein (ed.), Privatizing Social Security, (Chicago: University of Chicago

Press, 1998), pp. 33-62.

177

Edwards, Sebastian and Edwars, Alejandra Cox, “Economic Reforms and Labour

Markets: Policy Issues and Lessons from Chile”, National Bureau of Economic

Research Working Papers (Working Paper No. 7646, 2000) pp. 1-66.

__________, “Social Security Privatization Reform and Labour Market: The Case of

Chile”, National Bureau of Economic Research Working Papers (Working Paper No.

8924, 2002), pp. 465-489.

Egeli Haluk and Özen, Ahmet, “Türkiye’de Sosyal Güvenlik Sisteminin Yeniden

Yapılandırılmasına Yönelik Reform Sürecinin Değerlendirilmesi”, Mevzuat Dergisi

(Sayı: 142, Ekim 2009), Available at:

http://www.mevzuatdergisi.com/2009/10a/01.htm.

Elveren, Ali H., “Bireysel Emeklilik Sisteminin Makro Ekonomik Etkileri”, TİSK

İşveren Dergisi (Mayıs 2003), Available at: www.tisk.org.tr.

Elveren, Adem Y., “Social Security Reform in Turkey: A Critical Perspective”,

Review of Radical Political Economics (Vol. XX, No. X, 2008), pp. 212-232.

Elveren, Mehmet A. and Elveren, Adem Y., “Türkiye’de Refah Rejiminin

Dönüşümü ve Bireysel Emeklilik Sistemi”, Mülkiye Dergisi (Cilt: XXXIV, Sayı.

266, Bahar 2010), pp. 243-258.

Emeklilik Gözetim Merkezi (EGM), Bireysel Emeklilik Sistemi Gelişim Raporu

(İstanbul: EGM, 2004).

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2005).

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2006).

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2007).

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2008).

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2009).

178

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2010).

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2011).

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2012).

__________, Bireysel Emeklilik Sistemi Gelişim Raporu (İstanbul: EGM, 2013).

Erdoğdu, Seyhan, “Sosyal Politikada Değişim ve Sosyal Güvenlik Reformu” in İlhan

Uzgel and Bülent Duru (eds.), AKP Kitabı: Bir Dönüşümün Bilançosu, (Ankara:

Phonenix Kitabevi, 2009), pp. 660-686.

European Commission, “1998 Regular Report on Turkey’s Progress Towards

Accession”, Available at:

http://ec.europa.eu/enlargement/archives/pdf/key_documents/1998/turkey_en.pdf.

__________, “1999 Regular Report on Turkey’s Progress Towards Accession,

Available at:

http://ec.europa.eu/enlargement/archives/pdf/key_documents/1999/turkey_en.pdf.

__________, 2001 Regular Report on Turkey’s Progress Towards Accession,

Available at:

http://ec.europa.eu/enlargement/archives/pdf/key_documents/2001/tu_en.pdf.

__________, “2007 Regular Report on Turkey’s Progress Towards Accession”,

Available at:

http://ec.europa.eu/enlargement/pdf/key_documents/2007/nov/turkey_progress_repor

ts_en.pdf.

__________, “2008 Regular Report on Turkey’s Progress Towards Accession”,

Available at: http://ec.europa.eu/enlargement/pdf/press_corner/key-

documents/reports_nov_2008/turkey_progress_report_en.pdf.

__________European Commission, “2011 Regular Report on Turkey’s Progress

Towards Accession”, Available at:

http://ec.europa.eu/enlargement/pdf/key_documents/2011/package/tr_rapport_2011_

en.pdf

179

__________, “2012 Regular Report on Turkey’s Progress Towards Accession”,

Available at:

http://ec.europa.eu/enlargement/pdf/key_documents/2012/package/tr_rapport_2012_

en.pdf

__________, “2013 Regular Report on Turkey’s Progress Towards Accession”,

Available at:

http://ec.europa.eu/enlargement/pdf/key_documents/2013/package/brochures/turkey_

2013.pdf.

Fazio, Hugo and Riesco, Manuel, “The Chilean Pension Fund Associations”, New

Left Review (Issue 223, May-June 1997), pp. 90-101.

Fox, Louise and Palmer, Edward, “New Approaches to Multipillar Pension Systems:

What in the World Is Going On?” in Robert Holzmann and Joseph Stiglitz (eds.),

New Ideas about Old-Age Security: Towards Sustainable Pension System in the 21st

Century (Washington, D.C.: World Bank, 2001), pp. 90-132.

Frericks, Patricia, “Marketising Social Protection in Europe: Two Distinct Paths and

Their Impact on Social Inequalities”, International Journal of Sociology and Social

Policy (Vol. 31, No. 5/6, 2001), pp. 319-334.

Friedman, Milton, Capitalism and Freedom (Chicago: The University of Chicago

Press, 1962).

__________, “The Fragility of Freedom”, in Meyer Feldberg, Kate Jowell and

Stephen Mulholland (eds.), Milton Friedman in South Africa; His Visit to the

Graduate School of Business University of Cape Town (Cape Town: University of

Cape Town, 1976), pp. 3-10.

__________, “Speaking the Truth about Social Security Reform”, Cato Institute

Briefing Papers (No. 46, April 1999).

Gamble, Andrew, “The Free Economy and the Strong State: The Rise of the Social

Market Economy”, in Ralph Miliband and John Saville (eds.), The Socialist Register

(Vol. 16, 1979), pp. 1-25.

__________, “Neo-Liberalism”, Capital & Class (Vol. 25, No. 75, 2001), pp. 127-

134.

180

__________, “Two Faces of Neo-Liberalism”, in Richard Robison (ed.), The Neo-

Liberal Revolution: Forging the Market State (London: Palgrave Macmillan, 2006),

pp. 20-35.

Gill, Indermit S., Packard, Truman and Yermo, Juan, Keeping the Promise of Social

Security in Latin America (Washington, D.C.: World Bank, 2005).

Gillion, Colin and Bonilla, Alejandro, “Analysis of A National Private Pension

System: The Case of Chile”, International Labour Review (Vol. 131, No. 2, 1992),

pp. 171-195.

Gillion, Colin, “The Development and Reform of Social Security Pensions: The

Approach of the International Labour Office”, International Social Security Review

(Vol. 53, No. 1, 2000), pp. 35-63.

Glassman, Jim, “Primitive Accumulation, Accumulation by Dispossession,

Accumulation by ‘Extra Economic’ Means”, Progress in Human Geography (Vol.

30, No. 5, 2006), pp. 608-625.

Gore, Charles, “The Rise and Fall of the Washington Consensus as A Paradigm for

Developing Countries”, World Development (Vol. 28, No. 3, 2000), pp. 789-804.

Gökbayrak, Şenay, Refah Devletinin Dönüşümü ve Özel Emeklilik Programları

(Ankara: Siyasal Kitabevi, 2010).

Grugel, Jean, Riggirozzi, Pia and Thirkell-White, Ben, ”Beyond the Washington

Consensus? Asia and Latin America in Search of More Autonomous Development”,

International Affairs (Vol. 84, No. 3, 2008), pp. 499-517.

Gülalp, Haldun, “Globalization and Political Islam: The Social Bases of Turkey’s

Welfare Party”, International Journal of Middle East Studies (Vol. 33, No. 3, 2001),

pp. 433-448.

Gümüş, Erdal, “Sosyal Güvenlik Sisteminin Geleceği Umut Veriyor Mu?”, Gazi

Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi (Cilt: 6, No: 3, 2004), pp. 1-

16.

181

Hartsock, Nancy, “Globalization and Primitive Accumulation: The Contributions of

David Harvey’s Dialectical Marxism”, in Noel Castree and Derek Gregory (eds.),

David Harvey: A Critical Reader (Malden, MA: Blackwell, 2006), pp. 167-190.

Harvey, David, Spaces of Capital: Towards A Critical Geography (New York:

Routledge, 2001).

__________, The New Imperialism (New York: Oxford University Press, 2003).

__________, A Brief History of Neoliberalism (New York: Oxford University Press,

2005).

__________, “Neo-Liberalism as Creative Destruction”, Geografiska Annaler (Vol.

88, Issue 2, 2006), pp. 145-158.

Hayek, Friedrich A., The Constitution of Liberty (Chicago: The University of

Chicago Press, 1960).

Heller, Peter S., “Rethinking Public Pension Reform Initiatives”, IMF Working

Paper (Working Paper No. 61, April 1998), pp. 1-30.

Helsinki European Council, Presidency Conclusions, 10-11 December 1999,

Available at:

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/ACFA4C.ht

m.

Hendrick, Joshua D., “Globalization, Islamic Activism, and Passive Revolution in

Turkey: The Case of Fethullah Gülen”, Journal of Power (Vol. 2, No. 3, 2009), pp.

343-368.

Holzmann, Robert, “Pension Reform, Finanical Market Development, and Economic

Growth: Preliminary Evidence from Chile”, IMF Staff Papers (Vol. 44, No. 2, June

1997), pp. 149-178.

__________, “The World Bank Approach to Pension Reform”, Social Protection

Discussion Paper Series (Discussion Paper No. 9807, December 1999), pp. 1-22.

182

Holzmann, Robert and Palacios, Robert, “Individual Accounts as Social Insurance: A

World Bank Perspective”, Social Protection Discussion Paper (Discussion Paper No.

0114, June 2001), pp. 1-13.

Holzmann, Robert, and Hinz, Richard, Old Age Income Support in the 21st Century:

An International Perspective on Pension Systems and Reform (Washington, D.C.:

World Bank, 2005).

Huber, Evelyne, “Options for Social Policy in Latin America: Neoliberal versus

Social Democratic Models”, in Gosta Esping-Andersen (ed.), Welfare States in

Transition: National Adaptations in Global Economies (London: Sage Publications,

1996), pp. 141-191.

Hyde, Mark and Dixon, John, “Welfare Ideology, the Market and Social Security:

Toward a Typology of Market-Oriented Reform”, in John Dixon and Mark Hyde

(eds.), Marketization of Social Security (USA: Greenwood, 2001), pp. 1-26.

Iglesias-Palau, Augusto, “Pension Reform in Chile Revisited What Has Been

Learned?”, OECD Social, Employment and Migration Working Papers (Working

Paper No.86, 2009), pp. 1-87.

International Labour Organization, “Records of the Thirteenth Conference of

American States Members of the ILO”, Caracas, 30 September- 7 October 1992,

Available at:

http://white.oit.org.pe/oitamericas99/english/anteced/confre92/reconf.shtml.

__________, Turkish Government Social Security and Health Insurance Project

(Ankara: Undersecretariat of Treasury, 1996).

__________, Social Security: A New Consensus (Geneva: ILO, 2001).

__________, Economic Security for A Better World (Geneva: ILO, 2004).

__________, A Fair Globalization: The Role of ILO, International Labour

Conference, 92nd Session (Geneva: ILO, 2004a).

183

__________, “Social Security for All: Investing in Global Social and Economic

Development”, Issues in Social Protection Discussion Papers (Discussion Paper No.

16, 2006).

__________, The International Labour Organization and the Quest for Social

Justice 1919-2009 (Geneva: ILO, 2009).

__________, Recovering from the Crisis: A Global Jobs Pact (Geneva: ILO, 2009a).

__________, Extending Social Security to All: A Guide through Challenges and

Options (Geneva: ILO, 2010).

__________, Social Security for All: Building Social Protection Floors and

Comprehensive Social Security Systems (Geneva: ILO, 2012).

International Monetary Fund, “IMF Concludes Article IV Consultation with Turkey”

(99/17, 5 August 1997), Available at:

https://www.imf.org/external/np/sec/pn/1997/pn9717.htm.

__________, “Turkey-IMF Mission for the 1999 Article IV Consultation

Discussions and Third Review of the Staff Monitored Program” (2 July 1999),

Available at: http://www.imf.org/external/np/ms/1999/070299.htm.

__________, “Camdessus Expresses Deepest Sympathy with Turkey Following

Earthquake” (17 August 1999, 99/48), Available at:

https://www.imf.org/external/np/sec/nb/1999/nb9948.htm.

__________, “IMF Approves USD 501 Million in Emergency Assistance for

Turkey” (99/49, 13 October 1999), Available at:

http://www.imf.org/external/np/sec/pr/1999/pr9949.htm.

__________, “IMF Approves USD 4 Billion Stand-By Credit for Turkey” (99/66, 22

December 1999), Available at:

https://www.imf.org/external/np/sec/pr/1999/pr9966.htm.

__________, “Discussion on New IMF Stand-By Arrangement for Turkey to

Resume” (04/250, 30 November 2004), Available at:

http://www.imf.org/external/np/sec/pr/2004/pr04250.htm.

184

__________, “Review Discussions on Turkey’s IMF Stand-By Arrangement

Conclude Successfully” (06/107, 22 May 2006), Available at:

http://www.imf.org/external/np/sec/pr/2006/pr06107.htm.

Independent Evaluation Group, Pension Reform and the Development of Pension

Systems: An Evaluation of World Bank Assistance (Washington, D.C.: World Bank,

2006).

James, Estelle, “Protecting the Old and Promoting Growth: A Defense of Averting

the Old Age Crisis”, World Bank Policy Research Working Papers (Working Paper

No. 1570, January 1996), pp. 1-24.

Jochem, Sven, “Germany: The Public-Private Dichotomy in the Bismarckian

Welfare Regime”, in Daniel Beland and Brian Gran (eds.), Public and Private Social

Policy Health and Pension Politics In A New Era (New York: Palgrave Macmillan,

2008), pp. 190-206.

Karadag, Roy, “Neoliberal Restructuring in Turkey: From State to Oligarchic

Capitalism, Max Planck Institute for the Study of Societies Discussion Papers

(Discussion Paper No. 10/7, 2010), 1-32.

Kay, Stephen J., “Unexpected Privatizations: Politics and Social Security Reform in

the Southern Cone”, Comparative Politics (Vol. 31, No. 4, July 1999), pp. 403-422.

__________, “Political Risk and Pension Privatization: The Case of Argentina

(1994-2008)”, International Social Security Review (Vol. 62, No. 3, 2009), pp. 1-21.

Kemmerling, Achim and Neugart, Michael, “Financial Market Lobbies and Pension

Reform”, European Journal of Political Economy (Vol. 25, No. 2, 2009), pp. 163-

173.

Koç, Yıldırım, “Sosyal Güvenlik Reformu”, Mülkiye Dergisi (Cilt: XXIII, Sayı: 217,

Temmuz-Ağustos 1999), pp. 97-118.

__________, “Kamunun Sağlık ve Sosyal Güvenlik Sistemleri Stratejik Önemdedir”,

Yol-İş Sendikası Dergisi (Nisan 2008).

185

Köse, Ahmet H. and Bahçe, Serdal ““Hayırsever” Devletin Yükselişi: AKP

Yönetiminde Gelir Dağılımı ve Yoksulluk”, in İlhan Uzgel and Bülent Duru (eds.),

AKP Kitabı: Bir Dönüşümün Bilançosu (Ankara: Phonenix Kitabevi, 2009), pp. 492-

509.

Kritzer, Barbara E., “Privatizing Social Security: The Chilean Experience”, Social

Security Bulletin (Vol. 95, No. 3, Fall 1996), pp. 45-55.

Krueger, Anne O., Political Economy of Policy Reform in Developing Countries

(USA: MIT, 1993).

Krugman, Paul, “Dutch Tulips and Emerging Markets”, Foreign Affairs (Vol. 74,

No. 4, 1995), pp. 28-44.

Kurtz, Marcus J., “Understanding the Third World Welfare State after Neoliberalism

The Politics of Social Provision in Chile and Mexico”, Comparative Politics (Vol.34,

No. 3, April 2002), pp. 293-313.

Labour Law No. 3008, Official Gazette (No. 3330, 15.06.1936)

Law on Employee Insurance Institution No. 4792, Official Gazette (No. 6058,

16.07.1945).

Law on Turkish Republic Retired Fund No. 5434, Official Gazette (No. 7235,

17.06.1949).

Law on Income Tax No. 193, Official Gazette (No. 10700, 06.01.1961).

Law on Turkish Armed Forces Assistance Fund No. 205, Official Gazette (No.

10702, 09.01.1961).

Law on State Investment Bank No. 44, Official Gazette (No. 11662, 21.03.1964).

Law on Social Insurance Institution for Craftsmen, Tradesmen and Other Self-

Employed No. 1479, Official Gazette (No. 13956, 14.09.1971).

186

Law on Works Banned from Being Performed by Civil Servants Who Quit Public

Duty No. 2531, Official Gazette (No. 17480, 06.10.1981).

Law on Social Security for Agricultural Workers No. 2925, Official Gazette (No.

18197, 20.10.1983).

Law on Social Security for Self-Employed in Agriculture No. 2926, Official Gazette

(No. 18197, 20.10.1983).

Law on Attachment of Provisional Article to Social Insurance Act Number 506,

Official Gazette (No. 21171, 14.03.1992).

Law on Unemployment Insurance No. 4447, Official Gazette (No. 23810,

08.09.1999).

Law on Individual Pension Savings and Investment System No. 4632, Official

Gazette (No. 24366, 07.04.2001)

Law on Amendments to Certain Tax Laws No. 4697, Official Gazette (No.24458,

10.07.2001).

Law on Amendments to Certain Laws No.4842, Official Gazette (No. 25088,

24.04.2003).

Law on Social Security Institution Organization No. 4947, Official Gazette (No.

25178, 24.07.2003).

Law on Transfer of Healthcare Units of Some Public Institutions and Organizations

to the Ministry of Health No. 5283, Official Gazette (No. 25705, 19.01.2005).

Law on Social Security Institution No. 5502, Official Gazette (No. 26173,

20.05.2006)

Law on Social Insurance and General Health Insurance No. 5510, Official Gazette

(No. 26200, 16.06.2006).

Law on Corporate Tax No. 5520, Official Gazette (No.26205, 21.06.2006).

187

Law on Amendments to Individual Pension Savings and Investment System, and to

Certain Laws and Decrees No. 6327, Official Gazette (No. 28338, 29.06.2012).

Lear, John and Collins, Joseph, “Retiring on the Free Market: Chile’s Privatized

Social Security”, NACLA Report on the Americas (Vol XXXV, No 4

January/February, 2002), pp. 36-44.

Legislative Decree 233 on State Economic Enterprises, Official Gazette (No. 18435,

18.06.1984).

Legislative Decree 32 on Protection of the Value of Turkish Currency, Official

Gazette (No. 20249, 11.08.1989).

Luxemburg European Council, “Presidency Conclusions” (12-13 December 1997),

Available at:

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/032a0008.ht

m.

MacGregor, Susanne, “The Welfare State and Neoliberalism” in Alfredo Saad-Filho

and Deborah Johnston (eds.), Neoliberalism: A Critical Reader (London: Pluto Press,

2005), pp. 142-148.

Madrid, Raul L., “Ideas, Economic Pressures, and Pension Privatization”, Latin

American Politics & Society (Vol. 47, No. 2, Summer 2005), pp. 23-50.

Maier-Rigaud, Remi, “In Search of a New Approach to Pension Policy: The

International Labour Office between Internal Tension and External Pressure” in

Rune Ervik, Nanna Kildal and Even Nilssen (eds.), The Role of International

Organizations in Social Policy: Ideas, Actors and Impact (Northampton, MA:

Edward Elgar, 2009), pp. 165-189.

Marcel, Mario, “Chile’s 2008 “Reform of the Reform”: A Model for Other

Countries?” (2009), Available at:

http://csis.org/files/media/csis/events/090324_gai_marcel.pdf.

Martin, Patricia P. and Weaver, David A., “Social Security: A Program and Policy

History”, Social Security Bulletin (Vol. 66, No. 1, 2005), pp. 1-15.

188

Marx, Karl, Capital: A Critique of Political Economy (USA: Charles H. Kerr &

Company, 1906).

McCord, Anna, “The Impact of the Global Financial Crisis on Social Protection in

Developing Countries”, International Social Security Review (Vol. 63, No. 2, 2010),

pp. 31-45.

McMichael, Philip, “Globalization: Trend or Project?”, in Ronen Palan (ed.), Global

Political Economy, Contemporary Theories (London, New York: Routledge, 2000),

pp. 100-113.

Mesa-Lago, Carmelo, “Myth and Reality of Pension Reform: The Latin American

Evidence”, World Development (Vol. 30, No. 8, 2002), pp. 1309-1321.

__________, “Models of Development, Social Policy and Reform in Latin America”,

in Thandika Mkandawire (ed.), Social Policy in a Development Context (New York:

Palgrave Macmillan, 2004), pp. 175-202.

__________, “Reversing Pension Privatization: The Experience of Argentina,

Bolivia, Chile and Hungary”, Extension of Social Security Working Papers (Working

Paper No. 44, 2014), pp. 1-31.

Mesa-Lago, Carmelo and Muller, Katharina, “The Politics of Pension Reform in

Latin America”, Journal of Latin American Studies (Vol. 34, No. 3, August 2002),

pp. 687-715.

Minns, Richard, “The Social Ownership of Capital”, New Left Review (Vol. 219,

Sept-Oct 1996), pp. 42-61.

Moody, Kim, “Book Review” (A Brief History of Neoliberalism, by D. Harvey),

Dialectical Anthropology (Vol. 32, Issue 1-2, June 2008), pp. 53-58.

Myers, Robert J., “Privatization of Chile’s Social Security Program”, Benefits

Quarterly (Vol. I, No. 3, 1985), pp. 26-35.

Offe, Claus, “Some Contradictions of the Modern Welfare State”, in Christopher

Pierson and Francis G. Castles (eds.), The Welfare State Reader (Cambridge: Polity

Press, 2006), pp. 66-75.

189

Onaran, Özlem, “Adjusting the Economy through the Labour Market: The Myth of

Rigidity”, in Neşecan Balkan and Sungur Savran (eds.), The Ravages of

Neoliberalism: Economy, Society and Gender in Turkey (New York: Nova Science

Publishers, 2002), pp. 181-194.

Orenstein, Mitchell A., “The New Pension Reform as Global Policy”, Global Social

Policy (Vol. 5, No. 2, 2005), pp. 175-202.

__________, Privatizing Pensions: The Transnational Campaign for Social Security

Reform (New Jersey: Princeton University Press, 2008).

__________, “Pension Privatization in Crisis: Death or Rebirth of a Global Policy

Trend?”, International Social Security Review (Vol. 64, No. 3, 2011), pp. 65-80.

Orszag, Peter R. and Stiglitz, Joseph E., “Rethinking Pension Reform: Ten Myths

about Social Security Systems”, Paper presented at the World Bank Conference on

New Ideas About Old Age Security (September, 1999), pp. 1-48.

Öniş, Ziya, “Conservative Globalism at the Crossroads: The Justice and

Development Party and the Thorny Path to Democratic Consolidation in Turkey”,

Mediterranean Politics (Vol. 14, No. 1, 2009), pp. 21-40.

Özşuca, Şerife, “Küreselleşme ve Sosyal Güvenlik Krizi”, Ankara Üniversitesi SBF

Dergisi (Cilt: 58, No: 2, 2003), pp. 133-152.

Öztürk, Osman, “SGK Başkanı Yine Değişmiş”, Birgün (17 Ağustos 2011).

Özveri, Murat, “Yoksulluğun Yönetilmesi ve Sosyal Güvenlik Hakkı”, Praksis, (No.

9, Kış-Bahar 2003), pp. 321-336.

Packard, Truman G., “Pooling, Savings and Prevention: Mitigating the Risk of Old

Age Poverty in Chile”, World Bank Policy Research Working Papers (Working

Paper No. 2849, May 2002), pp. 1-74.

Petrol-İş, “Petrol-İş’in Araştırması: SSK’nın Fonları Nasıl Buharlaştırıldı?”

(12.12.2005), Available at: http://petrol-is.org.tr/haber/petrol-isin-arastirmasi-ssknin-

fonlari-nasil-buharlastirdildi-648.

190

Pierson, Chris, “‘Late Industrializers’ and the Development of the Welfare State”, in

Thandika Mkandawire (ed.) Social Policy in a Development Context (New York:

Palgrave Macmillan, 2004), pp. 215-245.

Pierson, Paul, “The New Politics of the Welfare State”, World Politics (Vol. 48,

January 1996), pp. 143-179.

Pinera, José, “Chile”, in John Williamson (ed.), The Political Economy of Policy

Reform, (Washington, D.C.: Institute for International Economics, 1994), pp. 225-

231.

__________, “Empowering Workers: The Privatization of Social Security in Chile”,

Cato’s Letter (No. 10, 1996).

__________, “Liberating Workers: The World Pension Revolution”, Cato’s Letter

(No. 15, 2001).

Pino, Ariel and Yermo, Juan, “The Impact of the 2007-2009 Crisis on Social

Security and Private Pension Funds: A Threat to Their Financial Soundness?”,

International Social Security Review (Vol. 63, No. 2, 2010), pp. 5-30.

Press Conference of Deputy Prime Minister Ali BABACAN and Minister of Finance

Mehmet ŞİMŞEK on some legal arrangements concerning İstanbul Finance Centre,

Supporting Entrepreneurship, Insurance Sector and Individual Pension System, 17

April 2012, Available at: www.hazine.gov.tr.

Quadagno, Jill S., “Welfare Capitalism and the Social Security Act of 1935”,

American Sociological Review (Vol. 49, October 1984), pp. 632-647.

Queisser, Monika, “The Second Generation Pension Reforms in Latin America”,

OECD Ageing Working Papers (Working Paper No. 5.4, 1998), pp. 1-106.

__________, “Pension Reform and International Organizations: From Conflict to

Convergence”, International Social Security Review (Vol. 53, No. 2, 2000), pp. 31-

45.

191

Regulation on Amendments to the Regulation on Principles Governing

Establishment and Activities of Pension Mutual Funds, Official Gazette (No. 26754,

12.01.2008).

Regulation on Individual Pension System, Official Gazette (No. 26842, 09.04.2008).

Reinhardt, Josephine B., “Los “Chicago Boys”: A Powerful Exchange of People and

Ideas between Chile and Chicago”, Bates College Honors Theses (Paper 41, 2012).

Riesco, Manuel, “Is Pinochet Dead?”, New Left Review (Issue 47, September-

October 2007), pp. 5-20.

Ritzer, George, “Book Review” (A Brief History of Neoliberalism, by D. Harvey),

American Journal of Sociology (Vol. 113, Issue. 1, July 2007), pp. 286-288.

Rodrik, Dani, “After Neoliberalism, What?”, Paper Presented at the Alternatives to

Neoliberalism Conference, (Washington D.C., 2002).

__________, “Goodbye Washington Consensus, Hello Washington Confusion? A

Review of the World Bank’s Economic Growth in the 1990s: Learning from a

Decade of Reform”, Journal of Economic Literature (Vol. XLIV, 2006), pp. 973-

987.

Rofman, Rafael, Fajnzylber, Eduardo and Herrera, German, “Reforming the Pension

Reforms: The Recent Initiatives and Actions on Pensions in Argentina and Chile”,

World Bank Social Protection Discussion Paper (No. 0831, 2008), pp. 1-61.

Saad-Filho, Alfredo, “From Washington to Post-Washington Consensus: Neoliberal

Agendas for Economic Development”, in Alfredo Saad-Filho and Deborah Johnston

(eds), Neoliberalism: A Critical Reader, (London: Pluto Press, 2005), pp. 113-119.

Sağlam, Erdal, “SGK Başkanı Teksöz’ün İstifa Nedeni Özerklik”, Hürriyet (5 Eylül

2006).

Sallan Gül, Songül, Sosyal Devlet Bitti, Yaşasın Piyasa! (Ankara: Ebabil Yayıncılık,

2006).

192

Sayan, Serdar, “Political Economy of Pension Reform in Turkey”, in Sumru Altuğ

and Alpay Filiztekin (eds.), The Turkish Economy: The Real Economy, Corporate

Governance and Reform (London: Routledge, 2006), pp. 252-275.

Shapiro, Daniel, “The Moral Case for Social Security Privatization”, Social Security

Choice Paper (No. 14, October 1998), pp. 1-10.

Sherman, Karl G., “A New Social Security Reform Consensus? The ISSA’s

Stockholm Initiative”, International Social Security Review (Vol. 53, 1, 2000), pp.

65-82.

Singh, Ajit, “Pension Reform, the Stock Market, Capital Formation and Economic

Growth: A Critical Commentary on the World Bank’s Proposals”, CEPA Working

Paper Series I (No. 2, April 1996), pp. 1-33.

Solimano, Andrés, Chile and the Neoliberal Trap: The Post-Pinochet Era (New

York: Cambridge University Press, 2012).

Sönmez, Sinan, “From Semi-Peripheral Welfarism to Neo-Liberal Solutions: What

About New Perspectives? Developing World and Turkey”, Presentation for RC 19

Conference on Social Policy in a Globalizing World, Firenze (September 2007).

State Planning Organization (SPO), First Development Report (1963-1967) (Ankara:

SPO).

__________, Second Development Report (1968-1972) (Ankara: SPO).

__________, Third Development Report (1973-1977) (Ankara: SPO).

__________, Fourth Development Report (1979-1983) (Ankara: SPO).

__________, Fifth Development Report (1985-1989) (Ankara: SPO).

__________, Sixth Development Report (1990-1994) (Ankara: SPO).

__________, Seventh Development Report (1996-2000), (Ankara: SPO).

193

__________, Eighth Development Report (2000-2001) (Ankara: SPO).

Stiglitz, Joseph, E., “More Instruments and Broader Goals: Moving toward the Post-

Washington Consensus”, WIDER Annual Lecture (Helsinki, Finland, January 1998).

__________, “Towards a New Paradigm for Development: Strategies, Policies, and

Processes”, Prebisch Lecture given at UNCTAD (Geneva, 1998a).

Talas, Cahit, Türkiye’nin Açıklamalı Sosyal Politika Tarihi, (Ankara: Bilgi Yayınevi,

1992).

Taylor, Marcus, “The Reformulation of Social Policy in Chile, 1973-2001:

Questioning a Neoliberal Model”, Global Social Policy (Vol.3 No. 1, 2003), pp. 21-

44.

Teksöz, Tuncay and Sayan, Serdar, “Simulation of Benefits and Risks after the

Planned Privatization of the Pension System in Turkey”, Emerging Markets Finance

and Trade (Vol. 38, No. 5, September-October 2002), pp. 23-45.

Tezel, Ali, “Özel Sağlık Kuruluşlarının Danışmanı SGK Başkanları!”, HaberTürk (8

Eylül 2009).

Tokgöz, Erdinç, Türkiye’nin İktisadi Gelişme Tarihi (1914-2004) (Ankara: İmaj

Yayınevi, 2004).

Topak, Oğuz, “Neo-Liberalizm ve Refah Devleti Miti”, in Mustafa Kemal Coşkun

(ed.), Yapı, Pratik, Özne- Kapitalizmin Dönüşüm Süreçlerinin Ekonomi Politik

Eleştirisi (Ankara: Dipnot Yayınları, 2009), pp. 103-131.

TURKSTAT, “Results of 2009 Poverty Study”, Available at: http://www.tuik.gov.tr.

Türkiye Cumhuriyeti Anayasası (1982), Available at:

http://www.anayasa.gen.tr/1982ay.htm.

Türkiye’nin Güçlü Ekonomiye Geçiş Programı (14 April 2001),

Available at: http://www.tcmb.gov.tr/yeni/duyuru/eko_program/program.pdf.

194

TÜSİAD, Optimal Devlet: Kamu Ekonomisinin ve Yönetiminin Yeniden Yapılanması

ve Küçültülmesine Yönelik Öneriler (İstanbul: TÜSİAD, Şubat 1995).

__________, Emekli ve Mutlu: Türk Sosyal Güvenlik Sisteminin Sorunları, Çözüm

Önerileri ve Özel Sigortacılık Girişimi (İstanbul: TÜSİAD, Ocak 1996).

__________, Türk Sosyal Güvenlik Sisteminde Yeniden Yapılanma: Sorunlar,

Reform İhtiyacı, Arayışlar, Çözüm Önerileri (İstanbul: TÜSİAD, Ekim 1997).

__________, Türk Emeklilik Sisteminde Reform: Mevcut Durum ve Alternatif

Stratejiler (İstanbul: TÜSİAD, Kasım 2004).

Undersecretariat of Treasury, “Letter of Intent” (26 June 1996), Available at:

https://www.imf.org/external/np/loi/062698.htm.

__________, “Letter of Intent” (9 December 1999), Available at:

http://www.imf.org/external/np/loi/1999/120999.HTM.

__________, “Letter of Intent” (18 December 2000), Available at:

https://www.imf.org/external/np/loi/2000/tur/03/index.htm.

__________, “Letter of Intent” (5 April 2003), Available at:

https://www.imf.org/external/np/loi/2003/tur/01/index.htm.

__________, Annual Report of Insurance and Private Pension Activities in Turkey

(Ankara: Undersecretariat of Treasury, 2003).

__________, “Letter of Intent” (2 April 2004), Available at:

https://www.imf.org/external/np/loi/2004/tur/01/index.htm.

Valdés-Prieto, Salvador, “Comments” in Holzmann et. al., “Comments on

Rethinking Pension Reform Ten Myths about Social Security Systems by Peter

Orszag and Joseph Stiglitz”, in Robert Holzmann and Joseph E. Stiglitz (eds.), New

Ideas About Social Security: Toward Sustainable Pension Systems in the 21st

Century (Washington D.C.: World Bank, 2001), pp. 57-89.

195

Weyland, Kurt, “Economic Policy in Chile’s New Democracy”, Journal of

InterAmerican Studies and World Affairs (Vol. 41, No. 3, 1999), pp. 67-96.

Williamson, John, “What Washington Means by Policy Reform”, Speeches and

Papers (Peterson Institute for International Economics, 2002).

__________, “The Strange History of the Washington Consensus”, Journal of Post

Keynesian Economics (Vol. 27, No. 2, Winter 2004), pp. 195-206.

Williamson, John and Williams, Matthew, “Notional Defined Contribution Accounts

Neoliberal Ideology and the Political Economy of Pension Reform”, The American

Journal of Economics and Sociology (Vol. 64, No. 2, April, 2005), pp. 485-506.

Wolfson, Martin H., “Neoliberalism and Social Security”, Review of Radical

Political Economics (Vol. 38, No. 3, Summer 2006), pp. 319-326.

World Bank, Averting the Old Age Crisis: Policies to Protect the Old and Promote

Growth (New York: Oxford University Press, 1994).

World Bank, Turkey: Country Economic Memorandum Structural Reforms for

Sustainable Growth (Washington D.C.: World Bank, No: 20657, TU, 2000).

World Bank, “Economic Reform Loan”, Loan Number 4549 TU (2000a), Available

at: http://www-

wds.worldbank.org/external/default/WDSContentServer/WDSP/ECA/2004/12/15/FB

1944A5BDD9DEA285256F03001638BC/1_0/Rendered/PDF/FB1944A5BDD9DEA

285256F03001638BC.pdf.

World Bank, World Development Report 2000/2001: Attacking Poverty (New York:

Oxford University Press, 2001).

World Bank, “Turkey Labour Market Study”, Report Number 33254-TR (2006),

Available at: http://siteresources.worldbank.org/INTTURKEY/Resources/361616-

1144320150009/Labor_Study.pdf.

World Bank, “Implementation, Completion and Results Report” (2006a), Available

at: http://www-

wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/07/20/0003

196

56161_20120720012943/Rendered/PDF/ICR23440P071050C0disclosed070180120.

pdf.

World Bank, Pensions in Crisis: Europe and Central Asia Regional Policy Note

(November, 2009), Available at:

http://siteresources.worldbank.org/ECAEXT/Resources/258598-

1256842123621/6525333-1260213816371/PensionCrisisPolicyNotefinal.pdf.

Yakut-Çakar, Burcu, “Turkey” in Bob Deacon and Paul Stubbs (eds.), Social Policy

and International Interventions in South East Europe (UK: Edward Elgar Publishing,

2007), pp. 103-129.

Yalman, Galip L., Transition to Neoliberalism: The Case of Turkey in the 1980s

(İstanbul: İstanbul Bilgi University Press, 2009).

Yaşar, Yavuz, “The Crisis in the Turkish Pension System: A Post Keynesian

Perspective”, Journal of Post Keynesian Economics (Vol. 36, No. 1, 2013), pp. 131-

152.

Yazar, İsa, “80 Milyar Yeni Lirayı Yöneten SGK’ya Başkan Dayanmıyor”, Zaman

(7 Ocak 2008).

Yeldan, Erinç and Köse, Ahmet H., “Türk Sosyal Güvenlik Sisteminin Yapısal

Sorunları Üzerine Gözlemler”, Mülkiye Dergisi (Cilt: XXIII, Sayı: 217, Temmuz-

Ağustos 1999), pp. 87-96.

Yenimahalleli Yaşar, Gülbiye, “Sosyal Güvenlik Sistemlerinin Tarihsel Gelişimi” in

Gülbiye Yenimahalleli Yaşar (ed.), Sosyal Güvenlik Sistemleri (Erzurum: Atatürk

Üniversitesi Açıköğretim Fakültesi Elektronik Ders Kitabı 2 Ünite, 2012).

Zabcı, Filiz, Dünya Bankası Yanılsamalar ve Gerçekler (İstanbul: Yordam Kitap,

2009).

“5 Nisan 1994 Kararları”, Sınıf Mücadelesi (Sayı: 118, 2008), Available at:

http://www.sinifmucadelesi.net/spip.php?article63.

58. Hükümet, Acil Eylem Planı (2003), Available at: http://www.linux.org.tr/wp-

content/uploads/2010/04/AcilEylemPlani.pdf.

197

WEB SITES

http://conventions.coe.int/Treaty/EN/Treaties/html/035.htm.

http://www.issa.int/the-issa/history/1927-1990.

www.atlanticcharter.ca/.

www.egm.org.tr.

www.ilo.org/ilolex/english/convdisp1.htm.

www.ilo.org/dyn/normlex/en/f?p=1000:62:0::NO:62:P62_LIST_ENTRIE_ID:24539

07:NO.

www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_IN

STRUMENT_ID:3065524:NO.

www.ilo.org/dyn/normalex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_I

D:102588.

www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_IN

STRUMENT_ID:312180:NO.

www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_IN

STRUMENT_ID:312182:NO.

www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_IN

STRUMENT_ID:312183:NO.

www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_I

D:102588,.

www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_I

D:102588.

198

www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_I

D:102588.

www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_I

D:102588.

www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_IN

STRUMENT_ID:312147:NO.

www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_I

D:102893.

www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_I

D:10289.

www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_IN

STRUMENT_ID:312267:NO.

www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_I

D:102893.

www.oecd.org/dataoecd/14/46/33619987.pdf.

www.tisk.org.tr.

www.tobb.org.tr.

www.tuik.gov.tr.

www.tusiad.org.

www.un.org/en/documents/udhr/.

199

INTERVIEWS

Interview with a High-Ranked Official in the Private Pension Department of the

Undersecretariat of Treasury, 29 December 2011.

Interview with a Trade Union Official, 24 January 2012.

200

APPENDIX A. TURKISH SUMMARY

BİR SINIF PROJESİ OLARAK NEOLİBERAL

EMEKLİLİK REFORMU: ŞİLİ VE TÜRKİYE ÖRNEKLERİ

Küresel emeklilik reformu kampanyası bağlamında 1980’den bu yana bütün

dünyada refah devleti küçülmekte ve özellikle Güney ülkelerinde özel emeklilik

sistemleri hızla gelişmektedir. Bu tez çalışması, Güney ülkelerinde arka arkaya

yürürlüğe giren özel emeklilik sistemlerini neoliberal ekonomik ve sosyal

politikaların en önemli yansımalarından biri olarak görmektedir.

Neoliberal dönüşüme uygun olarak emek piyasalarının serbestleştirilmesi

geleneksel emeklilik sistemlerinde krize yol açmış ve bu krizi aşmak için

Uluslararası Finans Kuruluşları, ulusal ve uluslararası sermaye grupları emeklilik

reformu önermişlerdir. Demografik yaşlanma sorunu ve emeklilik sistemlerinin

sürdürülebilirliği söz konusu aktörlerin temel savlarını oluşturmaktadır. Emeklilik

reformu devlete daha küçük bir rol biçmekte ve riskin kişiselleştirilmesine

dayanmaktadır. Diğer bir deyişle, nesiller arası dayanışmayı ortadan kaldırmakta ve

özel emeklilik sistemleri ile finansal piyasalara görev vermektedir.

Emeklilik sistemlerinde neoliberal aktörler tarafından zorla yaptırılan

değişiklikler her ne kadar literatürde “reform” kelimesi ile adlandırılsa da, bu

yaklaşım aynı zamanda olumlu bir anlam taşıdığından bu tez çalışması yaşanan

değişimi “dönüşüm” hatta “yeniden yapılandırma” olarak adlandırmaktadır.

Bu çalışma, öncelikle David Harvey ve Andrew Gamble’in neoliberalizm

üzerine geliştirdikleri tezlerin geçerliliğini Güney ülkelerindeki emeklilik

sistemlerinde yaşanan dönüşüm bağlamında göstermektedir. Daha sonra Şili ve

Türkiye örneği incelenmektedir. Neoliberal devlet oluşumunun ilk ve en önemli

örneği olan Şili ve Şili’de devlet emeklilik sisteminin çarpıcı bir şekilde

özelleştirilmesi diğer Güney ülkelerinde yaşanan değişime ışık tuttuğu için tezin bir

kısmını oluşturmaktadır. Bu tez çalışması Şili örneğine iki açıdan yaklaşmaktadır:

Şili’de emeklilik sisteminin özelleştirilmesi 1990’lı yıllar boyunca diğer Güney

ülkelerine bir başarı hikâyesi olarak pazarlanmıştır. Zaman içerisinde bu özelleştirme

201

sürecinin ve özel emeklilik sisteminin toplum üzerinde yarattığı olumsuz sosyal ve

ekonomik etkiler Şili modelini çok da istenmeyen bir model haline getirmiştir.

Türkiye örneği ise reform yaptırılan ülkeler arasındaki farklılıkları ortaya koymak

için detaylandırılmaktadır. Uluslararası Finans Kuruluşları Türkiye üzerinde de

reform baskısı oluşturmuştur. Ancak, her iki ülkede reform süreci farklı sonuçlar

doğurmuştur. Diğer bir ifadeyle, söz konusu reform süreci tarihsel olarak sınıf

mücadelesi ve siyasi dinamikler çerçevesinde gelişen ucu açık bir süreçtir. Neoliberal

politikalar Birinci ve İkinci Nesil Washington Uzlaşısı ile kurumsallaştırıldığı için

neoliberalizmin değişen müdahale şekilleri de tez içerisinde değerlendirilmektedir.

David Harvey, Karl Marx tarafından ortaya konulan kapitalist üretim

ilişkilerinde ilkel birikim sürecinin devam eden bir süreç olduğunu ancak günümüzde

bu durumun “el koyarak birikim” kavramıyla açıklanabileceğini öne sürmüştür. İlkel

birikim en basit tanımıyla toprak, su ve madenler gibi ortak mülkiyet alanlarının ve

işgücünün metalaştırılmasıdır. Özel mülkiyet proleterleştirme, metalaştırma,

yolsuzluk ve şiddet ağları ile yaratılmıştır. Harvey’e göre çağdaş kapitalist ekonomik

ilişkiler kredi ve hisse senedi spekülasyonları ile varlıklara el konması, yüksek borç

yükü, yolsuzluklar, büyük şirketlerde yaşanan çöküşlerle emeklilik fonlarının erimesi

hatta birçok kişinin finansal spekülasyonlar nedeniyle emeklilik haklarını yitirmesi

ile açıklanabilir.

Harvey’e göre neoliberalizm yöneten sınıf gücünün yeniden tesis edildiği bir

sınıf projesidir. Neoliberal politikalar sürekli finansal krizler yaratmakta ve bu krizler

sayesinde ülke içinde fakirden zengine kaynak aktarımı gerçekleşmektedir. Aynı

şekilde çevre ülkelerden merkez ülkelere kaynak aktarımı sağlanmaktadır.

Hem Harvey hem de Gamble neoliberal politikaların uygulanmasında devlete

büyük önem atfetmektedirler. Neoliberal anlayışta devlet ekonomik politikalar

bağlamında küçük olmalı, aynı zamanda sermayenin önündeki engelleri

kaldırabilecek kadar güçlü olmalıdır. Devlet müdahalesi, rekabetçi piyasa

koşullarında sermaye sınıfının kendi içindeki çelişkileri gidermek için de önemlidir.

Devlet serbest piyasanın etkin bir şekilde çalışması için gerekli olan kurumsal

düzenlemeleri yapmakla görevlidir. Kapitalizm birikimin devam etmesi için kendi

dışında bir şeye ihtiyaç duyar, dolayısıyla, devlet eliyle korunan her alan kapitalist

birikime açılmalıdır. Devletin otoriter gücünün neoliberalizm ile birlikte artması

202

aslında doğal bir durumdur. Örneğin, ancak güçlü bir devlet emeklilik haklarının

özelleştirilmesine karşı gelecek toplumsal güçlere otoriter yöntemlerle karşı

koyabilir. Özellikle 1980’lerden bu yana yükselen muhafazakârlık ve otoriterlik

neoliberalizmin hegemonyacı bir proje olmasını sağlamıştır.

Neoliberalizmin yükselişinde devletin rolü indirgemeci bir yöntemle

düşünülmemelidir. Clarke’ın vurguladığı gibi devlet, sermayenin ihtiyaçlarına göre

hareket eden otomatik bir düzenleyici değildir. Bilakis devlet bir sınıf mücadelesi

alanıdır. Devlet para ve hukuk ilişkileriyle sermayenin tahakkümü altına girmektedir.

Sınıf mücadelesinin değişen koşulları ve devlet yapısındaki değişmeler kapitalist

gelişmenin önceden belirlenmiş değil, ucu açık bir süreç olmasını sağlamaktadır.

Her ne kadar neoliberal politikalar bireysel özgürlük ve seçme özgürlüğü ile

pazarlandıysa da bunların gerçekleştirilmesi devletin otoriter gücü ile olmuştur.

Piyasa köktenciliğine karşı her türlü tehdit azaltılmalı veya ortadan kaldırılmalıdır.

Bundan dolayı, neoliberalizm tam istihdam politikalarını, devlet emeklilik

sistemlerini ve sendikacılığı hedef almıştır. Diğer bir ifadeyle, piyasacı özgürlük

anlayışının sağlanabilmesi için her türlü dayanışmacı ekonomik ve sosyal politika

terkedilmelidir.

Harvey’e göre neoliberalizm rızanın yaratılması ile meşrulaştırılmaktadır.

Çevre ülkelerde devletlerin otoriter baskısıyla, merkez ülkelerde ise orta sınıfın

girişimci bireycilik ile kuşatılmasıyla rıza yaratılmıştır. İşgücü piyasalarının

serbestleştirilmesi ve esnek çalışma sisteminin yerleştirilmesi örgütlü emeğin gücünü

azaltmış ve böylece neoliberal politikalara karşı mücadele edebilecek bir grubun

gücü kırılmıştır. Satın alma ve birleşmeler yoluyla medya sektöründe oluşan

tekelcilik neoliberal fikirlerin yayılmasına ve insanları neoliberalizmden başka bir

yolun mümkün olmadığına ikna etmede başarılı olmuştur. Son tahlilde, yöneten elit

kesim kendi çıkarlarını toplumun çıkarıymış gibi göstermeyi başarmıştır.

Uluslararası Finans Kuruluşları, özellikle Dünya Bankası şartlı fonları ile

Güney ülkelerindeki emeklilik reformlarının yürütücüsü haline gelmiştir. Bunlara ek

olarak, bölgesel kalkınma bankaları emeklilik reformlarını finanse etmişlerdir. Söz

konusu reformların meşrulaştırılması için en çok kullanılan sav emeklilik

sistemlerinin yaşlanma sorunu bağlamında sürdürülebilirliğidir. Hâlbuki nüfusun

yaşlanması Kuzey ülkelerinin en büyük problemlerinden biridir. Bu tez çalışması bu

203

çelişkiyi Gamble’in savıyla açıklamaktadır: Kapitalist ülkeler neoliberal reçeteleri

Güney ülkelerine daha kolay dayatmaktadırlar. Güney ülkelerinde genel olarak

yerleşik demokrasi anlayışı ve vatandaşlık haklarının olmaması bu durumu kolay

kılmaktadır. Öte yandan, gelişmiş kapitalist ülkelerde örgütlü işgücünün yoğun

olması ve vatandaşlık haklarının yasalar tarafından güçlü bir şekilde korunması

neoliberal reform süreçlerini zorlaştırmaktadır.

Neoliberalizm bir büyüme modeli olarak sunulsa da ekonomik büyümeyi

artırmak ve sermaye birikimini canlandırmak açısından çok da başarılı olamamıştır.

Ancak, çevreden merkeze ve fakirden zengine kaynak aktarımını sağlayarak yöneten

sınıfın gücünü pekiştirmiştir. Sadece gelişmiş kapitalist ülkelerde yöneten sınıfın

refahını artırmakla kalmayıp Latin Amerika, Doğu Avrupa ve eski Sovyet bloku

ülkelerinde yeni bir zengin sınıf yaratmıştır.

Neoliberal aktörler tarafından emeklilik reformunu meşrulaştırmak için

kullanılan yaşlanma ve emeklilik sistemlerinin sürdürülebilirliği söylemi yüzeysel ve

indirgemeci bir yaklaşımdır. Emeklilik konusu ve sürdürülebilirlik nüfusun

yaşlanması gibi teknik bir meseleye indirgenmektedir. Devlet tarafından düzenlenen

ve yönetilen emeklilik sistemleri verimsiz olmakla eleştirilmektedir. Hatta finansal

piyasaların derinleşmesinin önünde engel olarak görülmektedirler. Hâlbuki emeklilik

çok önemli bir sosyal meseledir. Tarihsel olarak refah devleti uygulamaları ve

sermaye birikimi 1970’lere kadar beraber gelişmiştir. Genelde refah devleti

uygulamalarının ve özelde emeklilik haklarının sermaye birikimi sınırlarını

zorlamasıyla beraber refah devleti uzlaşısı kırılmıştır.

Dönemsel olarak bakıldığında işçi sınıfının 19. yüzyıldan beri süregelen etkin

mücadelesi refah devleti uygulamalarını şekillendirmiştir. İkinci Dünya Savaşı’nın

yarattığı büyük yıkım savaş sonrası dönemde refah devleti uzlaşısını doğurmuştur.

Bu dönemin temel özelliği işçi sendikalarının çok güçlü olmasıdır. Refah devletinin

gelişiminde Uluslararası Çalışma Örgütü’nün sürece etkin katılımı bir diğer

belirleyicidir. Savaş sonrası dönemde sosyal güvenlik kavramı, Birleşmiş Milletler

İnsan Hakları Evrensel Beyannamesi, Uluslararası Çalışma Örgütü Sözleşmesi ve

Avrupa Sosyal Şartı ile düzenlenmiştir. Bütün bu düzenlemeler sosyal güvenliği

temel bir insan hakkı olarak değerlendirmiş ve bu haktan doğan yükümlülüklerin

devlet tarafından yerine getirilmesini öngörmüştür. Söz konusu dönemde sosyal

204

güvenlik ve emeklilik hakları ekonomik bir yük olarak görülmemiştir. Bilakis

ekonomik büyümenin ve kabul edilebilir bir sosyal düzenin en önemli belirleyicisi

olarak değerlendirilmiştir.

1970’ler ekonomik krizi ile yaşanan neoliberal dönüşümden çok önce liberal

yazarlar devlet emeklilik sistemlerinin bireysel özgürlükleri engellediğini ve

emekliliğin özel sistemler ile düzenlenmesi gereğini ileri sürmüşlerdir. Devlet eliyle

yeniden dağıtımın sağlanması ve emekli aylıklarının ödenmesi için çalışan nüfusun

vergi vermesi bireysel özgürlükleri sınırlayan uygulamalardır. Friedrich A. Hayek ve

Milton Friedman gibi liberallere göre, her birey geleceği konusunda karar verme

hatta hata yapma özgürlüğüne sahip olmalıdır. Diğer bir deyişle, herhangi bir birey

kendi geleceği için para biriktirmek istemiyorsa bu onun sorunudur. Devlet emeklilik

sistemini yönetmek yerine piyasada emeklilik senedi satan bir aktör konumuna

gelmelidir. Bu görüşler ışığında 1970’ler krizi neoliberal anlayışa sosyal güvenlik

haklarının sınırlandırılması hatta ortadan kaldırılması için sadece gerekli ortamı

sağlamıştır.

1970’lerde yaşanan ekonomik kriz ile başlayan neoliberal dönüşüm ithal

ikameci büyüme modelinden ihracata dayalı sanayileşme stratejilerine geçişi

hızlandırmıştır. Uluslararası piyasalarda rekabetçi olabilmenin en önemli koşulu

olarak işgücü piyasalarının serbestleştirilmesi öne çıkmış ve bu durum, tam istihdam

modeline dayanan geleneksel emeklilik sistemleri için bir felaket olmuştur.

On temel prensipten oluşan Birinci Nesil Washington Uzlaşısı Güney

ülkelerinde yaşanan ekonomik büyüme sorunlarına bir çözüm olarak 1980’li yıllarda

ortaya atılmıştır. Bunlar; maliye disiplininin sağlanması, kamu harcamalarının

öncelikli alanlarının yeniden belirlenmesi, vergi reformu yapılması, faiz oranlarının

serbest bırakılması, döviz kurunun tek tip olması ve piyasa koşullarında belirlenmesi,

ticaretin serbestleştirilmesi, doğrudan yabancı yatırımların özendirilmesi, devlet

teşekküllerinin özelleştirilmesi, deregülasyon ile devletin piyasa üzerindeki

kontrollerinin kaldırılması ve mülkiyet haklarının güvence altına alınması olarak

özetlenmiştir. Bu prensipler ışığında ve Uluslararası Para Fonu ile Dünya

Bankası’nın koşullu kredileri ile Güney ülkelerinde birinci nesil reformlar

yaptırılmıştır. Özellikle mali disiplin, kamu harcamalarının yeniden düzenlenmesi,

özelleştirme, deregülasyon ve vergi reformu refah devleti uygulamalarını hedef

205

almıştır. Kuzey ülkelerinin aksine sınırlı refah devleti modellerine sahip olan Güney

ülkeleri için bu durum sosyal güvenlik sorunlarını artırmıştır. Birinci Nesil

Washington Uzlaşısı ile kısa dönemde gerçekleşecek ekonomik büyümeyle mali ve

finansal dengeye önem verilmiş, söz konusu reform adımlarının uzun dönemli

etkileri üzerinde durulmamıştır. Neoliberal anlayışa uygun olarak her alan için bir

kıstas belirlenmiştir. Dünya Bankası’nın çok ayaklı emeklilik modeli de bu dönemde

Güney ülkelerine emeklilik alanında bir kıstas olarak önerilmiştir.

Birinci Nesil Washington Uzlaşısı ile belirlenen ve Güney ülkelerine

dayatılan prensipler bazı ülkelerde kısa süreli ekonomik büyüme yaratmasına rağmen

genel olarak ülkeleri daha kırılgan hale getirmiş, finansal krizlere maruz bırakmış ve

borç batağına sürüklemiştir. Hızlı finansallaşma süreçleri yüzünden kontrol

edilemeyen spekülatif finansal hareketler ve devlet müdahalesinin sınırlandırılması

Latin Amerika ve Doğu Asya ülkeleri, Rusya ve Türkiye’de ciddi finansal krizlere

yol açmıştır. Sonuç olarak, bu prensipler 1990’lı yıllarda revize edilmiştir. Sermaye

hesaplarının ve işgücü piyasalarının serbestleştirilmesi, sosyal güvenlik ve

yoksulluğun azaltılmasına yönelik programlar yeni uzlaşının göze çarpan ögeleridir.

Neoliberal politikaların dünya çapında işsizliği ve yoksulluğu artırması, emeklilik

meselesi üzerinden giden tartışmaların yoksulluğun azaltılması meselesine

kaymasına sebep olmuştur. Bu aslında, artan yoksulluğu yönetme ve kapitalist üretim

ve tüketim ilişkilerinin ihtiyaç duyduğu sağlıklı nüfus ve işgücünü sürdürebilme

girişimidir.

2008 küresel finans krizi emeklilik reformu tartışmalarını şiddetlendirmiştir.

Kriz ortamı ve finansal piyasalarda yaşanan hızlı değişimler özel emeklilik

fonlarında büyük kayıplara sebep olmuştur. Güney ülkelerine krizin etkisini azaltmak

için Uluslararası Finans Kuruluşları tarafından sağlanan yardım paketleri bu ülkelerin

tekrar şartlı borç yükü sarmalına girmelerine yol açmıştır. Her zamanki gibi, birikmiş

emeklilik fonları da batık bankalar gibi sermayedarların yatırımlarını kurtarmak için

kullanılmıştır. Güney ülkelerinin kriz ortamında bile özel emeklilik sistemlerini

devam ettirmeleri için baskıyla karşılaşmaları özel emeklilik sistemlerinden geri

dönülmeyeceğinin önemli bir göstergesidir. Sadece Macaristan ve Arjantin’de özel

emeklilik sistemi hiçbir şekilde sürdürülemeyeceği için fiili olarak millileştirilmiştir.

206

Emeklilik sisteminin özelleştirilmesi Şili’yi neoliberal sınıf projesinin en

önemli örneği haline getirmiştir. General Pinochet tarafından yönetilen askeri darbe

devlet-toplum ilişkisini ciddi anlamda değiştirmiştir. Amerika Birleşik Devletleri’nde

eğitim alan ve Hayek ve Friedman gibi ünlü liberallerin fikirlerinden etkilenen bir

grup ekonomist (Chicago Boys) Şili’de neoliberal politikaların hayata geçirilmesinde

büyük rol oynamışlardır. Emeklilik sisteminin radikal bir şekilde özelleştirilmesi

örgütlü işçi sınıfının gücünü tamamen çözmüş ve böylece neoliberal devlet

oluşumunun en önemli adımlarından birini oluşturmuştur. Bireysel özgürlüklerin

sağlanması söylemiyle gerçekleştirilen emeklilik reformu her nedense devletin

otoriter gücüyle yapılmıştır. Şili’de yöneten sınıf gücünün yeniden tesis edilmesinde

bu özelleştirme sürecinin etkisi büyüktür. Uluslararası Finans Kuruluşları, bölgesel

kalkınma bankaları ve liberal yazarlardan oluşan uluslararası koalisyon Şili emeklilik

modelini diğer Güney ülkelerine büyük bir hevesle pazarlamışlardır.

Yeni emeklilik sistemi emekli maaşlarını ve özel emeklilik piyasasında

rekabeti artırmak ile sistemin mali sürdürülebilirliğini sağlamak yerine yoksul

sayısını artırmış ve özellikle emeklilik fonu yöneticilerine, piyasa oyuncularına ve

onların uluslararası bağlantılarına, yüksek maaşlı ve tam zamanlı çalışan kesime

yarar sağlamıştır. Özel emeklilik piyasasında oluşan tekelleşme ve özel emeklilik

şirketleri ile yöneten sınıfın yakın ilişkisi neoliberal sınıf projesini açığa

çıkartmaktadır. Öte yandan, merkez-sol koalisyon hükümetlerinin neoliberal

politikaları sürdürmesi, bu çapta yapılan radikal bir reformdan geri dönmenin Şili

toplumunda istikrarsızlık ve güç dengesizliğine sebep olacağı ihtimalidir. Merkez-sol

koalisyon hükümetlerinin yaptığı en önemli düzenleme mevcut emeklilik sisteminin

yapısına bir dayanışma katmanı eklemesidir. Aslında, en önemli amaç İkinci Nesil

Washington Uzlaşısı ve kapsayıcı neoliberalizm anlayışına uygun olarak yoksulların

işgücü piyasasında yer almasını sağlamaktır.

Türkiye örneği neoliberal politikaların bütün Güney ülkelerinde aynı şekilde

uygulanamadığının bir göstergesidir. Şili’ye benzer şekilde Türkiye’de neoliberal

dönüşüm 1980 yılında yapılan askeri darbe ile başlamıştır. Hem askeri yönetim hem

de onu takip eden sivil hükümetler neoliberal ekonomik ve sosyal politikalara bağlı

kalmışlardır. İhracata dayalı sanayileşme stratejilerine uygun olarak ve uluslararası

piyasalarda daha rekabetçi olmak için işgücü piyasaları serbestleştirilmiştir. Aslında,

207

ihracata dayalı sanayileşme stratejileri ve onun gerekleri daha çok süreci

meşrulaştırmak için kullanılan söylemsel bir yöntem olarak kalmıştır. Emek

piyasalarındaki dönüşümün gerçek nedeni işgücünün daha önceden kazanmış olduğu

hakların elinden alınmasıdır. Bundan dolayı, sendikalaşma işgücü piyasaları için önü

alınması gereken önemli bir problem olarak tanımlanmıştır. Bu bağlamda, işgücü

piyasasının serbestleştirilmesi ve emeklilik reformu diğer Güney ülkelerinde olduğu

gibi yaşlanma sorunu, sürdürülebilirlik ve verimlilik gibi temel neoliberal savları

kullanarak eşzamanlı gerçekleştirilmiştir. Ancak, emeklilik sisteminde yaşanan

dönüşüm yöneten sınıf gücünün yeniden tesis edilmesi anlamına gelmemektedir. Şili

örneğinden farklı olarak Türk burjuvazisi gücünü 1970 krizinden önce tesis etmiştir.

Öte yandan, 1980’li yıllarda Uluslararası Para Fonu ve Dünya Bankası’nın gevşek

takibi emeklilik sistemindeki dönüşümü geciktirmiştir. Başka bir ifadeyle Türkiye

yaklaşık on yıl kazanmış ve ancak 1990’lı yıllar emeklilik reformuna tanık olmuştur.

Dolayısıyla, hem emeklilik reformu hem de emeği hedef alan saldırgan politikalar

yöneten sınıf gücünün sağlamlaştırılması anlamına gelmektedir.

Türkiye’de neoliberal dönüşümden önce bile evrensellik, yeterlilik ve eşitlik

ilkeleri üzerine kurulu Keynesyen refah devleti ve emeklilik sistemi olmamıştır.

Bireylerin emeklilik hakları çalışma statüsüne bağlı olarak düzenlenmiştir. Sosyal

güvenlik kapsamındaki nüfusun en büyük kısmını bağımlı bireyler oluşturmakta ve

bunlar aile üyeleri sayesinde emeklilik ve sağlık güvencesi kazanmaktadırlar.

Geleneksel emeklilik sistemi 1990’lı yılların başında yüksek açıklar vermeye

başlamış, ulusal sermaye grupları ve liberal kesimler bu açıkların mevcut sistemde

ödenen yüksek emekli maaşlarından kaynaklandığını belirterek reform çağrısında

bulunmuşlardır. Oysaki asıl sebep özel sektör işverenlerinin sorumlu oldukları sosyal

güvenlik primlerini 1980’li yıllar boyunca ödememeleridir. Büyük sermaye sahipleri

ve işverenler yüksek faiz oranlarıyla yatırım yapmak yerine finansal kârlardan

yararlanmayı seçmişler ve sosyal güvenlik primlerini ödememişlerdir. Yatırımların

azalması ve işgücü piyasalarının serbestleştirilmesi hem işsizliği hem de sosyal

güvenlik haklarından yararlanan insan sayısını azaltmıştır. Geleneksel emeklilik

sistemi çalışma statüsüne ve emeklilik primlerinin düzenli tahsil edilmesine sıkı

sıkıya bağlı olduğu için, işsizliğin artması ve söz konusu primlerin ödenmemesi

sistemi krize sürüklemiştir. Sisteme devlet katkısının olmaması da krizi

208

şiddetlendirmiştir. Sonuç olarak emeklilik reformu, 1990’lı yıllardan itibaren iktidara

gelen bütün hükümetlerin gündeminde önemli bir yer teşkil etmiştir. Bu durum

küresel düzeyde yürütülen emeklilik reformu kampanyasından ayrı düşünülemez.

Türkiye’de gerçekleştirilen emeklilik reform sürecine Uluslararası Finans

Kuruluşları koşullu kredileri ile fazlasıyla müdahil olmuşlardır. Müzakere sürecinde

olan Türkiye için bir diğer önemli aktör de Avrupa Birliği’dir. Şili örneğini bir başarı

hikâyesi olarak gören ulusal sermaye temsilcileri aynı şekilde bir emeklilik reformu

yapılmasını önermişlerdir. Hazine Müsteşarlığı ve Sosyal Sigortalar Kurumu’nda

çalışan bazı teknokratlar özel emeklilik sistemleri hakkında eğitim almak üzere

İngiltere’ye gönderilmişler ve Şili’de olduğu gibi neoliberal emeklilik reformuna

hizmet vermek üzere ülkelerine dönmüşlerdir. Bütün bunlara rağmen Türkiye’de o

günkü koşullarda radikal bir emeklilik sistemi reformu gerçekleşmemiştir. Büyük

çapta bir reform süreci meşrulaştırılamamıştır. Kamu emeklilik sistemine bir

tamamlayıcı katman olarak 2001 yılında hayata geçirilen Bireysel Emeklilik Sistemi

uzun yıllardır devlet koruması altında olan emeklilik alanının devlet eliyle özel

sektöre açılmasına çok çarpıcı bir örnek teşkil etmektedir. Bireysel emeklilik piyasası

zaman geçtikçe İkinci Nesil Washington Uzlaşısı’nın sermaye hesaplarının

serbestleştirilmesi prensibine uyumlu olarak uluslararası sermayenin istilasına

uğramıştır.

1999 ve 2006-2008 döneminde gerçekleştirilen emeklilik reformu sisteme

pek çok parametrik değişiklik getirmiştir. Emeklilik yaşının yükseltilmesi, emekli

aylığı bağlama oranlarının düşürülmesi ve farklı sosyal güvenlik kurumları arasında

norm birliğinin sağlanmaya çalışılması iki reform sürecinin ortak noktalarını

oluşturmaktadır. Her ne kadar dikte ettirilen emeklilik reformu mevcut sistemin

kapsamını artırmayı ve sosyal güvensizliğe bir çözüm getirmeyi vadetse de reform

süreci politikacılar tarafından bilinçli olarak emeklilik yaşı ve bağlama oranı gibi

teknik konulara indirgenmiştir. Diğer bir ifadeyle, emeklilik konusu politik bir konu

olmaktan çok teknik bir konu olarak yeniden tanımlanmıştır. Beklendiği üzere,

reform süreci sosyal güvenlik kapsamını genişletmemiştir; hatta emeklilik hakları

daraltılmış ve yoksul kesimin ekonomik ve sosyal durumu daha da kötüleşmiştir.

Bunun bir diğer sebebi de işgücü piyasasındaki esnek çalışma koşullarıdır.

209

Bugün Şili emeklilik sistemi tamamıyla özel emeklilik hesapları üzerinden

hizmet vermektedir. Türkiye de ise, tamamlayıcı Bireysel Emeklilik Sistemi’ne

rağmen kamu emeklilik sistemi ağırlığını korumaktadır. Sistemden çıkış oranları

Bireysel Emeklilik Sistemi’nin tamamlayıcı emeklilik aracı olmak yerine daha çok

bir tasarruf aracı olarak kullanıldığını ortaya koymaktadır.

Emeklilik ve sağlık politikaları özellikle Adalet ve Kalkınma Partisi

hükümetlerinin elinde kullanışlı bir sınıf projesi aracı haline gelmiştir. Parti’nin

kendi iktidarı için tehlike olarak gördüğü sivil ve asker bürokrasinin gücünü

azaltmanın bir yolu da emeklilik ve sağlık alanında yapılan reformlardır. Mesela,

sadece söz konusu sınıflara hizmet veren sağlık kuruluşları bütün topluma açılmıştır.

Öte yandan, emeklilik hakkı gibi yasal olarak düzenlenmiş sosyal haklar İslami

değerler etrafında hayır hizmetlerine dönüştürülmüştür.

Güney ülkelerindeki emeklilik sistemleri 1980’lerden bu yana

neoliberalizmin saldırısı altındadır. Şili ve Türkiye’deki emeklilik sistemi dönüşümü

bu durumun iki değişik örneği olarak tez çalışmasında incelenmiştir. Neoliberal

dönüşümden önce önemli bir politik mesele olarak değerlendirilen emeklilik

meselesi neoliberal politikaların uygulanmasıyla sıradan teknik bir konuya

indirgenmiş ve geleneksel emeklilik sistemleri verimsiz ve sürdürülemez olarak

nitelendirilmiştir. Hâlbuki önerilen neoliberal çözümler emeklilik sistemlerinde

yaşanan sorunların gerçek sebepleridir. Küresel düzeyde yürütülen emeklilik reformu

kampanyasının asıl amacı insan hayatında çok önemli bir yere sahip olan emeklilik

hakkına el konularak uzun yıllar boyunca devlet tarafından yürütülen, düzenlenen ve

korunan bir alanın sermaye birikimine açılmasıdır. Söz konusu reform süreci

evrensellik, eşitlik, kuşaklar arası dayanışma ve yoksullukla savaş gibi emeklilik

sistemlerinde olması gereken temel özellikleri ortadan kaldırmış yerine riskin

kişiselleştirilmesini getirmiş ve toplumlarda gelir dağılımı eşitsizliğini artırmıştır.

210

APPENDIX B. CURRICULUM VITAE

PERSONAL INFORMATION

Surname, Name: Yılmaz Akın, Burcu Gökçe

Nationality: Turkish (TC)

Date and Place of Birth: 4 March 1979, Eskişehir

Marital Status: Married

Phone: +90 850 200 60 82

Fax: +90 850 200 59 13

e-mail: byilmaz@eximbank.gov.tr

EDUCATION

Degree Institution Year of Graduation

MS

MA

Ankara University, European Communities Leiden University, European Union Studies

2006

2005

BS METU, Business Administration 2002

High School Kılıçoğlu Anatolian High School, Eskişehir 1997

WORK EXPERIENCE

Year Place Enrollment 2006- Present Turk Eximbank Assistant Manager 2006 January-2006

August Turkish Statistical Institute Expert

2002-2006 January Municipality of Ankara Expert

FOREIGN LANGUAGES

Advanced English

211

APPENDIX C. TEZ FOTOKOPİSİ İZİN FORMU

ENSTİTÜ

Fen Bilimleri Enstitüsü

Sosyal Bilimler Enstitüsü

Uygulamalı Matematik Enstitüsü

Enformatik Enstitüsü

Deniz Bilimleri Enstitüsü

YAZARIN

Soyadı : Yılmaz Akın

Adı : Burcu Gökçe

Bölümü: Uluslararası İlişkiler

TEZİN ADI (İngilizce) : Neoliberal Pension Reform As A Class Project: The

Cases of Chile and Turkey

TEZİN TÜRÜ : Yüksek Lisans Doktora

1. Tezimin tamamından kaynak gösterilmek şartıyla fotokopi alınabilir.

2. Tezimin içindekiler sayfası, özet, indeks sayfalarından ve/veya bir

bölümünden kaynak gösterilmek şartıyla fotokopi alınabilir.

3. Tezimden bir (1) yıl süreyle fotokopi alınamaz.

TEZİN KÜTÜPHANEYE TESLİM TARİHİ:

X

X

X